A report by CNBC said, the Joe Biden-led administration in the United States will automatically cancel $39 billion in student debt for 804,000 borrowers. This relief is a result of fixes made to the income-driven repayment plans in the student loan system.
In accordance with the new rules, debtors will have their government-issued debt forgiven after paying for either 20 or 25 years, depending on variables including the time of borrowing and the type of repayment plan selected.
The Biden administration admitted that earlier assessments had not taken into account payments that were supposed to bring borrowers closer to debt freedom. In order to correct this, the government now takes into account partial or late payments as well as payments made during certain deferment and forbearance periods.
US Secretary of Education Miguel Cardona highlighted the need to address the flaws in the system, stating, “For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness.”
It’s worth noting that this announcement comes shortly after the Supreme Court struck down President Biden’s broader student loan forgiveness plan. The Education Department will notify eligible borrowers in the coming days regarding the debt forgiveness.
The move is part of the Biden administration’s efforts to alleviate the burden of student loan debt and provide relief to borrowers.