By Joy Young
The Biden-Harris Administration announced Wednesday that they will be automatically forgiving $1.2 billion in student debt, affecting about 153,000 people on the Saving for Valuable Education (SAVE) repayment plan.
To be eligible, the borrower must have taken out under $12,000 in student loans and must have made payments to their loans for at least ten years, according to the Federal Student Aid website. Borrowers over $12,000 are also eligible for relief through repayment reductions.
“As of today, we have approved loan relief for nearly 3.9 million borrowers who were counting on the Biden-Harris Administration to fix the broken student loan system and provide the forgiveness they earned and have been waiting for,” said U.S. Under Secretary of Education James Kvaal.
The Education Department adopted this program after the Supreme Court struck down Joe Biden’s student loan forgiveness plan in July 2023, which proposed to forgive over $400 billion in student loan debt.
“This is just one more step in a long, ongoing effort to fix a broken system and deliver student debt relief for millions of Americans,” Kvaal said.
The Save Plan, introduced in August 2023, aims to reduce the amount of accumulated debt for those with smaller loans so that the borrower owes does not become more than what they initially took out. The plan is based on the borrower’s family size, discretionary income, or money taken home after taxes and other deductions. Borrowers under $15 an hour are expected to pay $0 monthly on their student loans.
Depending on the type of loan, the SAVE plan will allow borrowers to receive forgiveness after 20 to 25 years of payments.
According to the SAVE brief released by the White House, many borrowers at risk of default borrowed less than $12,000, a subgroup “overlooked,” according to U.S. Secretary of Education Miguel Cardona.
“Many SAVE forgiveness recipients come from lower and middle-income backgrounds. Many took out loans to attend community colleges. Some were at higher risk of delinquency and default,” Cardona said. “The bottom line is that we’re providing real immediate breathing room from an unacceptable reality where student loan payments compete with basic needs like putting food on the table and accessing healthcare.”
Borrowers will begin receiving emails stating that their loans have been forgiven within the week and will start to see changes on their accounts shortly after. In July 2024, the Department plans to phase out the remaining benefits of the SAVE plan, reducing borrowers’ monthly payments from 10% of their discretionary income to 5%.
“With today’s announcement, we are once again sending a clear message to borrowers who had low balances: if you’ve been paying for a decade, you’ve done your part, and you deserve relief,” Cardona said.
