When President Joe Biden’s plan to erase up to $20,000 in federal student loans for 43 million borrowers was struck down by the Supreme Court, the hope for significant debt relief seemed lost. However, millions of borrowers were recently surprised when they received notices that their federal student loans were being eliminated through other government relief programs. This came as the Biden administration successfully wiped out loans totaling $127 billion for 3.6 million borrowers, marking the largest wave of student debt cancellation in over 60 years since the government began supporting educational loans.
The funding for this relief program will ultimately be shouldered by taxpayers. Currently, the Department of Education has a $1.6 trillion loan portfolio owed by 43 million borrowers, making it the largest lender for Americans seeking higher education. The government gains profit from the interest that borrowers pay, but loan defaults and canceled debts offset those earnings. Most years, the system is projected to run at a loss.
The Biden administration has utilized long-standing government relief programs, some of which have been around for years. However, these programs have historically been plagued with issues, forcing borrowers to navigate through complex bureaucratic hoops. By tweaking rules and temporarily waiving certain requirements, the Education Department has expedited long-overdue relief. Here are some of the main programs being used to eliminate loan debts, as well as stories of how five borrowers have benefited from them.
Public Service Loan Forgiveness
Debts canceled: $51 billion for 715,000 borrowers
Through the Public Service Loan Forgiveness, the Biden administration has been able to temporarily waive the program’s rules and help hundreds of thousands of borrowers qualify for loan debt cancellation. One of these borrowers is Derik Screen, a 41-year-old working in business intelligence. Thanks to the temporary waiver, Screen got his $86,000 loan balance eliminated, providing a sense of relief for his financial future.
Income-Driven Repayment Adjustment
Debts canceled: $42 billion for 855,000 borrowers
The Biden administration stepped in to address problems caused by loan servicers, who generally failed to guide borrowers towards income-driven repayment plans, resulting in excessive interests. As a result, hundreds of thousands of borrowers suddenly had their loans forgiven. One of these borrowers is Chris White, who had his $22,000 debt for his electrical engineering degree erased after years of intermittent payments and a loan default before the pandemic.
Borrower Defense to Repayment and Closed-School Discharge
Debts canceled: $22.5 billion for 1.3 million borrowers
When Corinthian Colleges and ITT Technical Institutes collapsed in 2014, the federal student loan provision known as “borrower defense to repayment” allowed former students to request loan forgiveness. This resulted in a wave of borrower defense applications, with many left unattended for years. Through the Biden administration’s settlement of a class-action claim, borrowers like Sally Olsen, who attended American InterContinental University, were finally offered relief for what they had been through.
As such, amidst legal battles and bureaucratic hurdles, the Biden administration has succeeded in providing significant relief to millions of Americans struggling with student loan debt.
