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Students who borrowed $12,000 or less for college and have been paying their loans back for at least 10 years got a pleasant surprise Friday, when the Biden administration announced that they could see their debt wiped out next month.
The relief will apply only to borrowers enrolled in the Education Department’s new income-driven repayment plan. Known as Saving on a Valuable Education, or SAVE, it offers a quicker path to cancellation for low-balance borrowers or those who took out $12,000 or less. Borrowers on an income-driven repayment plan typically see forgiveness after 20 or 25 years.
While elements of the new SAVE plan took effect last summer, the cancellation provision wasn’t supposed to kick in until July. The Education Department didn’t specify a reason for the accelerated timeline.
“I am proud that my administration is implementing one of the most impactful provisions of the SAVE plan nearly six months ahead of schedule,” President Biden said in a statement. “This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans. And, it’s part of our ongoing efforts to act as quickly as possible to give more borrowers breathing room so they can get out from under the burden of student loan debt, move on with their lives and pursue their dreams.”
Borrowers eligible for forgiveness will be notified in February and won’t have to take further action. So far, about 6.9 million borrowers have enrolled in the SAVE plan, but the department didn’t say how many people are expected to see relief next month.
Republicans in the House and Senate slammed the Biden announcement, saying it will make college more expensive and put America on a path toward bankruptcy. They also criticized the department for moving up the timeline on SAVE implementation while “blundering” the rollout of the new Free Application for Federal Student Aid.
“President Biden is downright desperate to buy votes before the election—so much so that he greenlights the Department of Education to dump even more kerosene on an already raging student debt fire,” said Representative Virginia Foxx, the North Carolina Republican who chairs the House education committee.
Borrowers who attended community colleges are expected to particularly benefit from this debt-cancellation pathway. Some analysts have argued that the SAVE plan could lead to a version of free community college. The department estimates that 85 percent of future community college borrowers will be debt-free after 10 years under the SAVE plan, according to the release.
