The White House announced an additional $9 billion in federal student debt relief Wednesday for an additional 125,000 borrowers, which officials said adds up to a total of about $127 billion in cancelled debt for nearly 3.6 million people so far under President Joe Biden’s administration.
Wednesday’s announcement approves $5.2 billion in debt relief for 53,000 public employees people under public service loan forgiveness programs; about $2.8 billion in debt relief for nearly 51,000 borrowers who have made 20 years or more of payments, through fixes to income-driven repayment; and $1.2 billion for nearly 22,000 borrowers who have a total or permanent disability and were identified and approved for loan discharge by the Social Security Administration.
The Biden administration has sought workarounds to ensure some form of student debt forgiveness after the U.S. Supreme Court struck down the president’s plan to use existing legislation to waive up to $20,000 in student loans for millions of borrowers.
To do so, the administration approved debt cancellation through investigating and fixing historical inaccuracies in payment counts qualifying toward forgiveness; by executing public service loan forgiveness programs; by forgiving debt for borrowers with a total and permanent disability; and by cancelling debt for borrowers who were cheated or misled by their schools. Just last month, the Biden administration approved $37 million in relief for students who enrolled at the University of Phoenix between Sept. 2012 and Dec. 2014.
The White House’s announcement comes days after federal student loan payments resumed on Oct. 1. Payments were paused during the global COVID emergency.
While the annual growth rate of student debt has slowed, the total balance of national student debt has increased, according to federal statistics compiled by the Education Data Initiative. The national balance of total student loan debt is now over $1.765 trillion — and $1.644 trillion of that (or 93.1%) is in federal student loans.
The Consumer Financial Protection Bureau expects that 20% of student loan borrowers may struggle as scheduled payments resume, and that borrowers who are already having trouble with other payment obligations “are especially likely to struggle with their student loan payments if they don’t get some sort of payment relief,” such as enrolling in an income-driven repayment plan.
To give borrowers breathing room to reacclimate to monthly loan payments, the Department of Education has created a 12-month “on-ramp” that will protect them from the worst consequences for missing payments, making late payments or making only partial payments. The grace period will prevent unpaid interest from capitalizing onto the principal amount of the loan, and borrowers will not be reported to credit bureaus, referred to collection agencies or be considred in default.
