Here’s who is eligible for student loan debt relief after Biden’s latest actions

By Katie Lobosco, CNN

The Biden administration has taken multiple actions to make it easier for federal student loan borrowers to receive debt forgiveness that they may already be entitled to under existing programs.

The latest moves, announced earlier this week, help borrowers who are enrolled in what’s known as the income-driven repayment program, or IDR. Roughly 9 million borrowers with more than $500 billion in outstanding federal student loans are currently using an IDR plan to pay off their debt, according to government data.

There are four IDR plans that allow borrowers to avoid loan default by lowering their monthly payments based on their income and family size — so that the amounts are smaller than they would be under the standard 10-year repayment plan. IDR also promises loan forgiveness after 20 or 25 years of payments are made, depending on the specific plan.

But reviews by the Department of Education and the Government Accountability Office show that the program has been mismanaged. A recent report found that at least 3,000 borrowers potentially had enough qualifying payments to be eligible for forgiveness as of September 1, 2020, but only 132 borrowers had received forgiveness by June 2, 2021.

The actions announced this week aim to resolve those issues. The Department of Education said it will begin implementing the changes immediately but that borrowers may not see an updated account until later this year.

These new moves can potentially help millions of people. A vast majority of borrowers qualify for smaller monthly payments under IDR plans regardless of their income or debt amount.

The Department of Education estimates that 3.6 million borrowers will be three years closer to receiving loan forgiveness through the IDR program and thousands will be eligible for forgiveness immediately after the changes are implemented.

Here’s a breakdown of who could benefit:

Borrowers whose payments have been miscounted

The Department of Education found “significant flaws” in the way its office of Federal Student Aid and loan servicers track borrowers’ payment progress in IDR plans. As a result, some borrowers may have made more qualifying payments than they are getting credit for.

To address the issue, the Department of Education is recounting payments for the vast majority of federal student loan borrowers, including all Direct Loans and federally managed Federal Family Education Loan Program loans.

All payments made, regardless of the repayment plan the borrower was using at the time, will retroactively be counted as an IDR-qualifying payment. Payments made prior to consolidation on consolidated loans will also count.

Borrowers who have been in forbearance

The changes announced this week will also help federal student loan borrowers who did not get accurate information from their loan servicers about their repayment options and were steered into forbearance — which allows for a temporary stop in payments — when they could have been enrolled in an IDR plan.

Forbearance can be a quick and easy solution to help borrowers struggling to make their monthly loan payments to stay out of default. But sometimes it’s better for borrowers to enroll in an IDR program instead. That way they can make a smaller monthly payment — which can be as low as $0 — while also getting credit toward forgiveness.

A Department of Education review suggests that loan servicers placed some borrowers into forbearance in violation of department rules. Forbearance cannot be granted for more than 12 months at a time or for more than 36 months cumulatively.

But more than 13% of all Direct Loan borrowers between July 2009 and March 2020 have used forbearance for at least 36 months cumulatively, the Department of Education said.

To address this problem, the Department of Education will be conducting a one-time account adjustment that will count time spent in forbearance of more than 12 consecutive months or for more than 36 months cumulative toward forgiveness under IDR.

Borrowers who were steered into shorter-term forbearances will be able to seek an account review by filing a complaint with the Federal Student Aid Ombudsman at StudentAid.gov/feedback.

Borrowers seeking Public Service Loan Forgiveness

The Public Service Loan Forgiveness program cancels debt for eligible public sector workers after they make 10 years of qualifying monthly payments.

Those payments must be made using an IDR plan, so the forthcoming adjustments will help bring some of those borrowers closer to forgiveness as well. The Department of Education estimates that 40,000 borrowers will see immediate forgiveness under the Public Service Loan Forgiveness program as a result of the latest changes.

Last year, the Biden administration temporarily expanded eligibility for the Public Service Loan Forgiveness Program through October 31, 2022, so that the program now includes borrowers who had loans that didn’t originally qualify.

Borrowers who still don’t qualify for relief

The vast majority of federal student loan borrowers are allowed to make payments through an IDR plan. The new changes will make sure those who pay for 20 or 25 years will receive forgiveness.

Borrowers with very high incomes compared with their amount of debt may not ultimately benefit from the actions being taken this week because they are more likely to pay off their loans before becoming eligible for forgiveness in either 20 or 25 years.

Some Democrats are urging President Joe Biden to grant broader loan forgiveness for each of the 43 million federal student loan borrowers, regardless of their incomes, debt amounts or repayment plan.

But the President has so far resisted that pressure. Instead he has taken a piecemeal approach to fixing issues with the loan repayment system. In addition to the changes announced this week, the administration has also made it easier for students who were defrauded by their for-profit colleges to receive debt relief, as well as those who are permanently disabled.

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