The Biden administration has announced a new round of student loan forgiveness for almost 300,000 borrowers. This relief is part of an accelerated student loan forgiveness rule associated with the new SAVE plan. Education Secretary Miguel Cardona stated that the administration is committed to giving Americans some breathing room. The announcement follows a prior batch of discharge approvals under SAVE in February and is separate from Biden’s unveiling of a new mass loan forgiveness plan earlier in the week.
President Biden enacted the SAVE plan last fall as the Covid-19 pause on student loan payments ended. SAVE is designed to be the most affordable income-driven repayment plan, allowing borrowers to have any remaining balance forgiven after 20 or 25 years of repayment. A unique feature of SAVE is early student loan forgiveness, which can allow borrowers to qualify for discharge in under 20 years. This benefit is aimed at borrowers who took out smaller amounts of student debt and may have had difficulty paying it back.
Under SAVE’s accelerated student loan forgiveness rule, borrowers who initially took out $12,000 or less in federal student loans could qualify for forgiveness after only 10 years of repayment. The forgiveness timeline increases by one year for every additional $1,000 borrowed above the initial mark. Nearly 206,000 borrowers have benefited from the early student loan forgiveness under SAVE, totaling $3.6 billion.
The implementation of early student loan forgiveness is being done on a rolling monthly basis as borrowers enroll in SAVE and reach their discharge milestones. However, there are legal challenges looming for the SAVE plan. Two Republican-led coalitions of states have filed lawsuits seeking to block the program, arguing that it is an unauthorized backdoor student debt cancellation program. The Education Department has established the SAVE plan under legal authority that allows it to create regulations for income-driven repayment plans.
In addition to the early student loan forgiveness under SAVE, the Biden administration announced a new mass student loan forgiveness plan earlier in the week. This plan is expected to benefit up to 30 million borrowers and is more focused than Biden’s initial mass debt cancellation initiative. The program must go through additional procedural steps before it can be implemented, but it could be available to borrowers by the fall. Some borrowers may receive forgiveness automatically, while others may need to apply for it, and the program is also expected to face legal challenges.
