The US Department of Education plans to write off the debt of 40,000 student borrowers, after addressing the “longstanding failures” of their federal student loan programs, Education officials said on Tuesday.
The agency resolved several historical issues in the utility loan repayment and income-contingent repayment (IDR) programs. Federal Student Aid estimates that these changes will cancel the debt of at least 40,000 borrowers under the Public Service Loan Cancellation Program. Several thousand borrowers with older loans will also receive forgiveness via IDR, officials said. More than 3.6 million borrowers will also receive at least three years of additional credit for IDR cancellation.
Officials said qualified borrowers will receive immediate credit to their accounts, however, the outdated student loan data system will not be officially updated until fall 2021.
The ministry’s announcement comes after a 2021 investigation revealed that 4.4 million borrowers had repaid their loans for at least 20 years under the department’s IDR program, but only 32 had had their debts forgiven.
“Student loans were never meant to be a life sentence, but it certainly is for borrowers stuck on the debt relief they are eligible for,” the US Secretary of Education said. Miguel Cardona, in a press release. “Today, the Ministry of Education will begin to address years of administrative failures that effectively denied the promise of loan cancellation to some borrowers enrolled in IDR plans. These actions once again demonstrate the commitment of the Biden-Harris administration to deliver meaningful debt relief and to ensure that federal student loan programs are administered fairly and efficiently.
The ministry has taken several steps to address errors in its loan forgiveness programs.
The FSA said it will credit student borrowers who have been steered into long-term forbearance plans, a program that allows borrowers in financial difficulty to suspend loan repayments while interest continues to swell – this option generally worsened the financial situation.
The ministry estimates that 3.6 million borrowers will receive at least three years of new credit in preparation for cancellation.
The plan excludes borrowers who have spent less than 12 consecutive months and less than 36 cumulative months in forbearance plans, however an “account review” has been promised for those who choose to file a complaint with the FSA.
The agency said a single account review is available to anyone who has made an IDR-eligible payment for all direct student loans and federally administered Family Education Loans Program loans. .
Visit the United States Department of Education website for more information on changes to their loan relief programs and whether or not you qualify for credit.
- 100,000 Student Borrowers Can Now Have Their Debt Canceled Through Federal Student Loan Forgiveness Program