President Joe Biden's administration announced Wednesday that it will cancel $1.2 billion in student debt for about 153,000 people who took out modest student loans and have been paying them off for the past decade or more.
The White House said Wednesday that the relief plan was originally scheduled to begin in July but that they will begin paying off the loans about six months earlier.
We explain the details below.
Protesters outside the Supreme Court protest after they invalidated Biden's student debt relief program, June 30, 2023. Kent Nishimura / Los Angeles Times via Getty Imag
Who can receive forgiveness?
According to the White House website, to qualify you must:
Be enrolled in the Biden Administration's payment plan called SAVE (
Saving on a Valuable Education
), which launched last summer.
Have been making payments for at least 10 years.
Have borrowed $12,000 or less for college.
For every additional $1,000 a person initially borrowed, they will receive relief after an additional year of payments.
The White House explains: "For example, a borrower enrolled in SAVE who took out $14,000 or less in federal loans to earn an associate's degree in biotechnology would receive full debt relief starting this week if they have been paying for 12 years." .
[Biden Administration announces that it will forgive student debt for 153,000 borrowers]
Anyone enrolled in SAVE will have their loan forgiven after 20 or 25 years, depending on whether they have graduate school loans.
“This action will particularly help community college borrowers, low-income borrowers, and those struggling to pay their loans,” Biden said in his statement.
How to receive forgiveness?
Borrowers will begin receiving emails from Biden this Wednesday telling them that they have been approved for forgiveness and will not need to take any additional steps to receive help, according to the Department of Education.
In the coming days, the Department will process the forgiveness and borrowers will see their loans forgiven in their accounts.
Next week, the Department will begin sending emails to borrowers who may be eligible for this forgiveness if they enroll in SAVE.
Those already enrolled in that payment plan do not need to take any additional action.
[This is how the Biden Administration's new program to forgive student debt can apply to the 'SAVE' plan]
How does the SAVE plan work?
Under SAVE,
monthly payments are based on the borrower's income and family size, not the loan balance.
The plan guarantees that if the person makes their monthly payments, their balance will not increase due to unpaid interest.
There are already 7.5 million borrowers enrolled in the SAVE Plan, but 30 million more people are eligible.
How to sign up for SAVE?
You must go to the website and fill out the application, which should take about 10 minutes.
For this you need:
An
FSA ID
, which is a username and password to log into the US Department of Education's online system.
Your financial information.
You can give permission directly on the website for them to take your income information from the IRS.
You can also upload those documents manually if your income has changed since you last filed your taxes.
If you do not have any income, you can certify it in the online application.
Your personal information,
including your permanent address, a US address (if your permanent address is abroad), telephone number, and email address.
Your spouse's financial information
, if the situation applies (the FSA website says that including this information has the effect of lowering your payments).
What happens if a borrower doesn't sign up for forgiveness and never pays?
Experts warn that anyone who does not pay and does not qualify for forgiveness risks serious consequences.
“The financial repercussion of defaulting on a student loan is probably one of the worst financial decisions you can make as an individual,” says Robert Farrington, founder of College Investor, which provides financial literacy to young people.
[Experts indicate that canceling student debt would benefit the most vulnerable population and affect the entire economy]
Failure to pay, especially for federal government loans, could lead authorities to garnish borrowers' tax refunds, Social Security payments or disability payments, he said.
It can also limit access to further student aid in the future and even make it difficult to get a job.
Government efforts to forgive student debt
In June last year, the Supreme Court invalidated a previous action by Biden with which he sought to forgive debts of up to $20,000 for some 43 million people.
The justices found it unconstitutional because it was not explicitly approved by Congress, they said, and it never went into effect.
Biden has highlighted his administration's efforts to “pursue an alternative path,” which he said had already canceled student debt for 3.6 million people.
Wednesday's announcement follows similar actions in recent months to reduce this debt.
[“It's heartbreaking”: students react with indignation to the Supreme Court ruling against Biden's plan to forgive student debt]
Shortly after loan payments restarted in October, Biden approved $9 billion in student loan debt forgiveness for 125,000 people, including 53,000 recipients of the Public Service Loan Forgiveness Program.
Later in October, the Education Department released a proposal that it said would aim to provide debt relief to four categories of borrowers, including those whose outstanding balances on their federal loans exceed the amounts they initially borrowed.
“With today's announcement," Secretary of Education Miguel Cardona said in a statement Wednesday, "we are once again sending a clear message to borrowers who had low balances: if you have been paying for a decade, you have made your part and deserve relief.”