The Biden administration announced on Friday that they would erase $39 billion for 800,000 borrowers due to inaccurate payment counts made under income-driven repayment (IDR) plans.
The plan will automatically and retroactively credit qualifying borrowers for mistakes made by federal loan services. It will also credit borrowers for late and partial payments and forbearances before the pandemic. The Department of Education said the plan will fix “historical failures in the administration of the federal student loan program in which qualifying payments made under IDR plans that should have moved borrowers closer to forgiveness were not accounted for.”
Biden first announced IDR debt elimination last spring, but the most recent announcement comes just weeks after the Supreme Court struck down his one-time student loan forgiveness program to eliminate $400 billion in student loan debt for tens of millions of borrowers. The new plan is expected to cost as much as $330 billion over the next decade.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said education secretary Miguel Cardona. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges and borrowers with permanent disabilities, including veterans.”
But the Biden administration isn’t just fixing mistakes. It is also cutting IDR loan payments in half. Existing plans require borrowers to pay between 10 and 20 percent of their income for two decades, at which point the rest of the debt is forgiven. Biden’s Saving on a Valuable Education (SAVE) plan would cut payments down to 5 percent for 10 or 20 years, depending on how much money is owed. The Department of Education says that under the new plan, borrowers would repay just $6,121 for every $10,000 borrowed, not the $10,956 that they are currently paying
South Carolina representative Ralph Norman has already promised he would support efforts in the House to stop SAVE, but that such legislation would not make it through the Senate.
“This means it’ll fall on the judicial branch to, once again, slap down Biden’s unconstitutional, inappropriate overreach,” said Austin Livingston, Norman’s communications director. “It’s not a matter of if that will happen but instead when.”
