Education Dept. Cancels $39 Billion in Student Debt for 804K Borrowers by Fixing Loan Servicing Errors
The U.S. Department of Education has cancelled $39 billion in federal student loans for more than 804,000 borrowers as a result of fixes to errors made by loan servicers acting on behalf of the government, The New York Times reported.
For years, these companies made extensive mistakes in tracking payments and guiding borrowers through the payment process, The New York Times reported in 2019. Borrowers eligible for the new relief are those whose loans are owned by the Education Department and who have enrolled in income-drive repayment programs or would have qualified for loan forgiveness under such programs if they had enrolled in them. According to these programs, borrowers generally need to make payments for 20 or 25 years. After that period, any remaining balance is forgiven.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers. By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans. This Administration will not stop fighting to level the playing field in higher education.”
The U.S. Supreme Court recently ruled President Joe Biden’s student loan forgiveness program to be unconstitutional, finding that Cardona lacked the authority to cancel student loans. That program would have called for the cancellation of up to $20,000 in debt for recipients of Pell Grant recipients with U.S. Department of Education (DOE) loans and up to $10,000 in debt for non-Pell Grant recipients. But this latest announcement is within the education secretary’s authority to administer loan repayment programs, according to the Times.
Some 45 million borrowers owe the government, the largest lender to Americans for higher education, a total of $1.6 trillion, the Times reported. Their loan payments have been paused since March 2020 but borrowers will have to resume paying in October as a result of the Supreme Court’s decision.