The Biden administration has announced a new round of student loan forgiveness for nearly 300,000 borrowers, 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 providing relief to hardworking Americans. This follows a prior batch of accelerated discharge approvals under SAVE in February and is separate from a new mass loan forgiveness plan unveiled earlier in the week.
President Biden enacted the SAVE plan last fall as the Covid-19 pause on student loan payments ended. SAVE is an income-driven repayment plan that allows borrowers to have any remaining balance forgiven after 20 or 25 years in repayment. A unique feature of SAVE is the early student loan forgiveness, which allows borrowers who originally borrowed $12,000 or less in federal student loans to qualify for forgiveness after 10 years in repayment. The forgiveness timeline increases by one year for every additional $1,000 originally borrowed above $12,000.
The Biden administration has announced a second batch of early student loan forgiveness approvals under SAVE, benefitting over 206,000 borrowers and totaling $3.6 billion in forgiveness. The approvals are implemented on a rolling monthly basis as borrowers enroll in SAVE and reach their discharge milestones. However, the SAVE plan is facing legal challenges from Republican-led coalitions of 18 states, who argue that it operates as a backdoor debt cancellation program not authorized by Congress.
In addition to the SAVE plan, the Biden administration has announced a new mass student loan forgiveness plan that is in the works. This plan will target several categories of borrowers for relief and is expected to benefit up to 30 million borrowers. The program is expected to go live by the fall but may face legal challenges. Some borrowers may receive forgiveness automatically, while others may need to submit an application. The Education Department established the SAVE plan under legal authority that allowed for the creation of income-driven repayment plans.
Observers expect the new mass forgiveness plan to be challenged in court, similar to the legal threats facing the SAVE plan. The Education Department has not yet formally responded to the lawsuit challenging the SAVE plan. Despite the legal challenges, the Biden administration remains committed to providing student loan relief to borrowers through these new forgiveness initiatives. The SAVE plan has already provided billions of dollars in forgiveness to borrowers, benefiting those who attend community colleges and took out relatively small amounts of student debt.
