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Loans

The Biden Administration canceled $39 billion of student loans for 804,000 borrowers — here's how to see if you're one of them

A fix to the income-driven repayment system means forgiveness for over 800,000 borrowers.

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The Biden Administration announced $39 billion in automatic loan forgiveness to 804,000, according to a July 14 press release from the U.S. Department of Education. 

This wave of student loan forgiveness is separate from the forgiveness plan outlined in August 2022 that the Supreme Court recently struck down in June 2023.

The department cited "historical failures in the administration of the Federal student loan program" that inaccurately represented the number of qualifying months counting toward forgiveness for borrowers on income-driven repayment (IDR) plans. Under Secretary James Kvaal said in the statement that "millions of borrowers had earned loan forgiveness but never received it."

Borrowers on income-driven repayment plans are eligible for forgiveness after a certain number of months of repayment, generally equating to 20 or 25 years. However, that relief hasn't always come as promised. Vice President Kamala Harris said in a statement that "many were placed into forbearance by loan servicers in violation of the rules, and others did not get appropriate credit for their monthly payments."

To remedy this, the Department of Education is adjusting the IDR plan system to make sure that all borrowers have an accurate number of qualifying months and payments. As a result, it's giving some borrowers automatic forgiveness.

Who qualifies for the Biden Administration's student loan forgiveness?

Those who have been on repayment plans, hold federal direct loans or federal family education loans and have completed 20 or 25 years of qualifying months are eligible for forgiveness, depending on when the loans were originated, the type of loan borrowed and the specific type of plan.

"It is mostly borrowers who were on ICR (Income-Contingent Repayment) who will receive the forgiveness," student aid expert Mark Kantrowitz told CNBC Select by email. ICR is the oldest of the repayment plans, established in 1994.

Other repayment plans have not existed long enough to reach the qualifying 20 or 25-year mark. Income-based repayment (IBR) has existed since 2009 and requires 25 years of payments to reach forgiveness. Pay-as-you-earn (PAYE) launched in 2012, and requires 20 years of payments for forgiveness. Revised pay-as-you-earn (REPAYE) didn't launch until 2015 and requires 20 or 25 years, depending on whether loans are undergraduate only or graduate loans.

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How to find out if you qualify for student loan forgiveness

The Department of Education started notifying eligible borrowers on Friday, July 14. No action is required from borrowers.

After this initial wave, the Department of Education will continue to notify eligible borrowers who have reached the forgiveness threshold of 240 or 300 qualifying payments (depending on their loan type and repayment plan) every two months.

By next year, the department says that it will have all borrowers' payment counts updated — then, anyone who has an income-driven repayment plan can check with their loan servicer to see how many qualifying months they've completed.

What happens if you're qualified for forgiveness?

Discharges will begin 30 days after borrowers receive emails notifying them of their eligibility.

If you're notified that you're eligible for forgiveness, loan repayment will be paused until the discharge is processed, the Department of Education says. Your loan servicer should let you know when your student loan debt is discharged.

Anyone who chooses to opt out of the discharge will return to repayment when student loan repayment resumes, with interest resuming on September 1 and payments due starting in October.

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What's the future of student loan forgiveness?

With the Biden administration's widespread student debt relief blocked by the Supreme Court, the future of student loan forgiveness is currently on hold.

The administration and the Department of Education are creating new ways to make payments affordable when payments resume. A new income-driven replacement plan, the SAVE plan, will replace the REPAYE plan in the summer 2024. The Department of Education states that the SAVE plan "will cut payments on undergraduate loans in half compared to other IDR plans, ensure that borrowers never see their balance grow as long as they keep up with their required payments, and protect more of a borrower's income for basic needs." According to the administration, under the SAVE plan a borrower who makes less than $15 an hour "will not have to make any payments." Borrowers on a REPAYE plan will automatically be enrolled in the SAVE plan, and applications for the new SAVE plan opening later in summer 2023.

After more than a three-year pause for federal student loan borrowers, repayment will resume in 2023 with interest accrual beginning September 1 and payments due in October.

Bottom line

Student loan debt relief is on its way for over 800,000 borrowers who have been paying for years with an income-driven repayment plan. Most of the qualified borrowers will be on Income-Contingent Repayment (ICR) plans. There's no action required for borrowers — the best way to find out if you qualify is to wait for the government to email you.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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