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The federal government said more than 800,000 will have their remaining student loans wiped out. Here's how it works and who qualifies.
WASHINGTON — The Biden administration announced Friday that it is forgiving $39 billion in federal student loans for more than 800,000 borrowers.
Friday's announcement is separate from Biden's previous plan to offer mass debt forgiveness to tens of millions of Americans, which was recently struck down by the U.S. Supreme Court.
The administration said this new debt forgiveness is being offered to correct errors from previous administrations.
Who is eligible for student loan forgiveness?
The forgiveness announced Friday involves hundreds of thousands of borrowers on income-driven repayment plans, according to the Department of Education.
The types of borrowers eligible for this plan include those with Direct Loans and those with Federal Family Education Loans held by the Department (including Parent PLUS loans of either type).
Under the Higher Education Act and Dept. of Ed. regulations, a borrower is normally eligible for forgiveness in income-driven plans after making 240 or 300 monthly payments — the equivalent of 20 or 25 years on a standard repayment plan.
While the number of required payments varies based on when the loans were first taken out and what type they are, Biden administration officials contend that inaccurate payment counts have caused borrowers to lose progress toward their loan forgiveness threshold.
Last April, the Biden administration announced it was making a one-time adjustment to ensure borrowers' monthly payments were being counted accurately.
What the Biden administration is doing now is counting months where payments were partial or late, when loans were paused by forbearance for an extended time, or when the loans were deferred any time after 2013.
Previously, those time periods and payments (or deferred payments) wouldn't count towards the 240 or 300-month threshold for loans to be forgiven.
When the adjustment was first announced in April 2022, officials estimated 3.6 million student-loan borrowers would wind up receiving at least three years of credit toward eventual debt cancellation through the new changes.
Those who are eligible will be notified by the Education Department starting Friday that they qualify to have the rest of their loans forgiven without any further action on their part. Borrowers who wish to opt out of the relief for any reason should contact their loan servicer. Borrowers will be notified by their servicer after their debt is discharged.
According to the Department of Education, it will continue to notify borrowers who reach the forgiveness thresholds "every two months until next year when all borrowers who are not yet eligible for forgiveness will have their payment counts updated."
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