This benefit was to come into effect in July, alongside other benefits, such as lower monthly payments for borrowers. But administration officials now plan to begin canceling student debt under the SAVE plan starting next month.
Nearly 7 million borrowers are now enrolled in the program, according to the administration, although it is unclear how many of them would qualify for immediate forgiveness.
The new path to student debt relief comes as the White House and Biden’s campaign work to ensure he gets credit for his efforts to cancel student debt — while pursuing an approach to several components to increase the total number of borrowers receiving relief.
Even though the Supreme Court struck down its landmark massive debt relief program last summer, the administration still approved $132 billion worth of relief for more than 3.6 million borrowers as part of other Ministry of Education programs.
Accelerated implementation of part of the SAVE plan will help the Biden administration continue to accumulate debt forgiveness totals. The Education Department also plans to continue announcing rounds of forgiveness for loans it approves for borrowers under previously announced initiatives, such as those targeting borrowers who have been paying for decades and public officials.
Furthermore, the Ministry of Education is working on another component of its new massive debt relief plan, “Plan B”, which will target various populations of borrowers. But it will still be months before these policies emerge from a lengthy regulatory process.
Biden said in a statement that Friday’s announcement was part of his administration’s “continuing efforts to move as quickly as possible to give more borrowers breathing room so they can free themselves from the burden of debt student”.
“I will not give up on using every tool at our disposal to provide student loan borrowers with the relief they need to achieve their dreams,” Biden said.
The Biden administration finalized the SAVE plan last summer. It is significantly more generous to borrowers than previous versions of income-driven repayment programs, reducing monthly payments and offering new interest subsidies intended to keep balances from ballooning.
The shorter term for low-balance borrowers was intended for those who took on relatively small debts to attend community college or who have debt because they started attending college but never completed it. Borrowers with relatively low balances are most likely to struggle to pay their debt and then default.
Under this plan, borrowers who initially borrowed $12,000 or less begin receiving a discharge of their remaining balance after making 10 years of payments. This period increases by one year for each additional $1,000 borrowed. So borrowers who initially borrowed $13,000 would have to repay for 11 years before receiving forgiveness, for example.
Republicans have called Biden’s SAVE plan unfair and fiscally irresponsible, blowing away the hundreds of billions of dollars the program is expected to cost.
“President Biden is downright desperate to buy votes before the election – so much so that he’s giving the Department of Education the green light to throw even more kerosene on an already raging fire on the student debt,” the representative said. Virginie Foxx, the chairman of the House Education Committee, said in a statement. “It wouldn’t surprise anyone if the ministry relied on children playing with abacuses to balance its books – it’s a complete and utter disaster.”
Department of Education officials declined to quantify the number of borrowers they say could benefit from the new, shorter path to loan forgiveness under the SAVE plan. But they said they are ramping up efforts to increase signups, especially for borrowers who could receive immediate forgiveness if they simply sign up.
So far, 6.9 million borrowers are now enrolled in Biden’s SAVE program, the Department of Education said. About 3.9 million of these borrowers earn income low enough to qualify for a $0 monthly payment.
Still, some borrowers have faced administrative hurdles and delays trying to enroll in Biden’s program. The Consumer Financial Protection Bureau reported last week that more than 450,000 borrowers who applied for the SAVE plan had been waiting more than a month for their loan servicer to process their application last fall.
These delays mean borrowers may have to pay higher interest and payments than they otherwise would have, the CFPB noted.
Education Department officials said this week that the backlog had been reduced but not eliminated. A ministry spokesperson said that as of Wednesday, 140,000 applications had been pending with the services for 30 working days or more.
The department’s Office of Federal Student Aid “works to ensure that officers process applications in a timely manner and that these backlogs do not persist,” the spokesperson said in a statement. “The ministry is not afraid to hold servicers accountable when they fail to meet their contractual obligations to borrowers and will continue to monitor the processing time of (income-driven repayment) applications.”
