In a move that will bring a sense of relief to countless borrowers, the Joe Biden-led administration in the United States has made a landmark decision to automatically cancel $39 billion in student debt. As reported by CNBC, this bold step will impact a substantial number of individuals, with approximately 804,000 borrowers set to benefit from this measure.
The cancellation of debt is a direct outcome of crucial modifications made to the income-driven repayment plans within the student loan system. Moving forward, the government will cancel the debts of borrowers who have consistently made payments for either 20 years or 25 years, taking into account factors such as the timing of loan acquisition and the specific repayment plan chosen.
The Biden administration has acknowledged the shortcomings of the previous system, which failed to account for payments that should have propelled borrowers closer to achieving debt-free status. In a statement to CNBC, US Secretary of Education Miguel Cardona commented, “For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness.”
To expand the scope of debt forgiveness, the Biden administration has recognized the importance of payments made during periods of deferment and forbearance, as well as partial or late payments. This approach aims to provide support to a wider range of borrowers striving for financial relief.
It is noteworthy that this announcement follows a recent Supreme Court ruling that struck down President Joe Biden’s comprehensive student loan forgiveness plan. Nevertheless, the administration remains unwavering in its determination to alleviate the burden of student debt for borrowers.
In the days ahead, the Education Department will actively notify eligible borrowers, ensuring a smooth implementation of the debt cancellation process and offering much-needed respite to those affected.
