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Biden administration makes it easier to forgive student loans with income-based repayment plans

How the policy works: The Ministry of Education said it would make a one-time adjustment to borrowers’ accounts to provide credit for loan forgiveness under income-based repayment for any month in which a borrower made a payment. Officials will credit borrowers whether or not they were enrolled in an income-driven repayment plan.

“Every instance where a borrower has spent a month that could have accrued credit for IDR forgiveness, we extend that credit,” James Kvaal, undersecretary for education, told reporters, using the income-based reimbursement acronym.

But how the department will deal with months in which borrowers haven’t made payments is more complicated.

Ministry officials said they would credit borrowers for months in which borrowers were on long-term forbearance or any type of deferral before 2013. But borrowers will not receive automatic credit for months in which they were in default or registered for short-term forbearances or certain types of deferrals after 2013.

“We have regulations underway that will look at what types of statuses should be eligible for IDR credit and there may be potential for us to improve those rules as this process moves forward,” Kvaal said.

By the numbers: The Department for Education said the changes resulted in “immediate debt cancellation” for at least 40,000 borrowers under the Civil Service Loan Forgiveness Scheme and “several thousand” borrowers under income-based reimbursement programs.

An additional 3.6 million borrowers will receive at least three years of retroactive credit for loan forgiveness under income-based repayment. The credit will be automatically applied to borrowers’ accounts whether or not they are currently enrolled in an income-based repayment plan, the department said.

Targeted approach: The policy is the Biden administration’s latest effort to focus on targeted loan cancellation for certain populations of borrowers as the White House weighs a decision on broader and more widespread debt cancellation than many progressives. are looking for.

The Ministry of Education has already taken steps to cancel the debts of borrowers working in the civil service, borrowers who have become disabled for life and those who have been defrauded by their college. In total, the Biden administration said it canceled $17 billion in debt for 725,000 borrowers.

Kvaal told reporters the Department of Education is focusing on debt relief “where we are clearly authorized to help borrowers” by making improvements to existing federal programs.

But the Department of Education declined to say on Tuesday what legal powers it was using to make the changes to income-tested reimbursement schemes.

A department spokesperson said only that the “policy changes rely on multiple legal authorities” which include the agency’s “long-standing ability to make account corrections and its authority to ensure borrowers are not not aggravated by a national emergency”.


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