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Biden Unveils Proposal to Erase Select Student Loan Debts Lower than $12,000
WASHINGTON — President Joe Biden announced on Friday that the Department of Education’s new repayment plan will result in the cancellation of student loan debt for certain federal loan borrowers.
Beginning next month, individuals who took out less than $12,000 in federal student loans and have been making repayments for 10 years will have their remaining loan balance cancelled once they enroll in the Saving on a Valuable Education Plan (SAVE).
In a statement, Biden said, “This action will be particularly beneficial for community college borrowers, low-income borrowers, and those who are struggling to repay their loans.”
He added, “It is part of our ongoing efforts to take prompt action and provide more borrowers with the opportunity to alleviate the burden of student loan debt, move forward with their lives, and pursue their aspirations.”
This initiative is an extension of the Biden administration’s previous attempts to cancel federal student loan debt. Last year, the Supreme Court ruled against the White House’s plan to provide one-time cancellation of up to $10,000 for federal borrowers. However, student loan borrowers who received Pell Grants, which provide federal assistance to low-income students for higher education expenses, could have qualified for an additional $10,000 in forgiveness.
Shortly after the Supreme Court’s ruling, the White House introduced the SAVE plan, along with a one-year off-ramp program. The off-ramp program ensures that creditors will not be notified if borrowers fail to make loan payments once repayments resume in October.
Biden stated, “Additionally, in light of the Supreme Court’s decision regarding our student debt relief plan, we are actively pursuing an alternative approach to deliver student debt relief to as many borrowers as possible, as quickly as possible. I will not back down from using all available resources to provide student loan borrowers with the relief they need to achieve their dreams.”
Approximately 6.9 million borrowers have already enrolled in the SAVE program, out of which 3.9 million have a $0 monthly payment.
Under the new plan, SAVE calculates loan payments based on a borrower’s income and household size. Balances are forgiven after a specific number of years. The Department of Education estimates that most borrowers will save about $1,000 per year under the new plan.
Borrowers who are currently on the Revised Pay as You Earn plan will be automatically enrolled in the SAVE program.
The states with the highest number of borrowers enrolled in the program are Texas (591,700), California (597,300), Florida (475,800), New York (374,300), and Pennsylvania (289,800).