President Joe Biden’s latest initiative to provide student-loan forgiveness is gaining clarity. The Education Department released revised regulatory language on Monday outlining its proposal to eliminate student debt through the Higher Education Act of 1965. Following the Supreme Court’s rejection of Biden’s initial broad debt relief plan in June, the Education Department promptly initiated a second attempt using the HEA. This law mandates a series of negotiation sessions with stakeholders to formulate the final rule. Two negotiation sessions have already taken place in October and November, with the conclusive two-day session scheduled for December 11 and 12. During these sessions, negotiators will deliberate on the department’s proposed relief plan, which aims to prioritize five specific groups of borrowers.
Takeaways:
- The Education Department has unveiled new information about its second debt relief initiative.
- Priority will be given to five specific borrower groups, particularly those with higher current balances than their initial amounts.
- The proposed text suggests that certain borrowers may be eligible for relief of up to $20,000.
Borrowers eligible for consideration are those enrolled in income-driven repayment plans with outstanding balances exceeding their initial repayment amounts
In the framework of income-driven repayment, the government allows borrowers to repay a portion of their debt based on their income, with the remaining amount forgiven after a minimum of 20 years of payments. Historically, due to the linkage of monthly payments to income, some borrowers experienced such minimal payments that they did not make a significant impact on the loan principal, resulting in growing balances.
As per the Department of Education’s recent proposal, borrowers enrolled in these repayment plans may qualify for up to $20,000 in debt relief. This eligibility is contingent upon having an income below 225% of the poverty line and a current balance surpassing the initial repayment amount. The agency suggests potentially waiving up to $20,000 to bridge the gap between the current owed sum and the amount at the initiation of repayment.
Additionally, individuals earning less than $125,000 as single individuals or less than $250,000 as married couples, and enrolled in the SAVE income-driven repayment, could be entitled to the cancellation of up to $20,000 beyond their initial repayment balance. SAVE represents the income-driven repayment version introduced by the Biden administration earlier this year.
Other borrowers eligible for consideration are those whose outstanding loan balances have increased since the commencement of their loan repayment.
For all other borrowers not falling into the aforementioned categories, there is a provision for the waiver of up to $10,000 for the amount exceeding their balance at the onset of repayment. According to the Department’s proposal, a borrower with an income less than 225% of the poverty line, enrolled in a repayment plan other than income-driven repayment, and possessing a balance exceeding their initial repayment amount would qualify for an additional $10,000 in cancellation.
Borrowers who initiated their repayment several decades ago
Borrowers who initiated their repayments several decades ago.
For an extended period, borrowers and advocates have voiced concerns about the difficulties borrowers face in accessing relief through Public Service Loan Forgiveness (PSLF). PSLF allows borrowers working for the government and certain nonprofits to have their debt canceled after a minimum of 10 years of payments. According to the Department’s proposal, eligible borrowers under PSLF who haven’t applied for the relief would see their debt erased.
Furthermore, borrowers qualifying for cancellation under income-driven repayment, where debt is forgiven after a minimum of 20 years of payments, would have their debt pardoned, even if they did not apply for the relief.
Borrowers who participated in programs that did not yield financial benefits for them.
The Department of Education has introduced regulations with the objective of removing career schools from the federal financial aid program if they fail to adequately equip students for employment. According to the Department’s proposal unveiled on Monday, borrowers who attended schools or programs that abruptly closed or where the agency intervened to prevent future borrowing for attendance would have their debt canceled.
Disclaimer :
This article is provided for informational purposes only and does not constitute financial advice. It is recommended to consult with a qualified financial professional before making any decisions regarding your student loans.