Biden administration announces $39 billion in student loan forgiveness

The Biden administration announced Friday that it will forgive the student loans of more than 800,000 borrowers who enrolled in income-driven repayment plans.

The plan will forgive $39 billion in federal student loans, according to the Education Department, through “fixes” to the count of monthly payments borrowers have made.

The Education Department first announced last year that it would offer a one-time adjustment to help address any inaccuracies in payment counts for borrowers in the plans. Income-driven repayment plans allow forgiveness after making a certain number of monthly payments, typically after 20 or 25 years.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness,” Education Secretary Miguel Cardona said in a statement Friday. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve,” he said.

Friday’s announcement drew criticism from some Republicans since it comes two weeks after the Supreme Court rejected a broader plan by the Biden administration to forgive more than $400 billion in federal student loan debt. That plan would have erased up to $20,000 in federal student debt for tens of millions of borrowers meeting certain income limits. The administration argued that the Higher Education Relief Opportunities for Students Act of 2003 gave the department authority to forgive debt. But critics argued that the plan burdened taxpayers with other peoples’ unpaid debt, and said the effort was an attempt to find loopholes in the legislation to push through sweeping changes that Congress would be unlikely to pass.

Within hours of the ruling, President Biden said he would pursue a “new path” to give borrowers relief using a different law, the Higher Education Act.

Biden had campaigned on a promise to ease student-loan debt, an issue popular with his political base, and one with added urgency now that loan payments that had been paused during the pandemic are set to resume this fall. The administration has announced other relief measures since Biden took office.

The plan announced Friday draws on the Education Secretary’s existing authority over loan repayment programs.

But critics argue the administration is going too far.

“The Biden administration’s blatantly political attempt to circumvent the Supreme Court is shameful,” Rep. Virginia Foxx (R-N.C.) said in a statement Friday. “The Biden administration is trampling the rule of law, hurting borrowers, and abusing taxpayers,” she said. “From day one, this administration has encouraged borrowers not to repay their loans and has expected taxpayers to foot the bill. Today’s celebration of counting no payments as payments is just the latest example of the ongoing delusion at the White House.”

Abby Shafroth, director of the Student Loan Borrower Assistance Project, said Friday’s announcement has no relation to the Supreme Court case and doesn’t raise legal concerns because it’s built on long-standing congressional authority over income-driven repayment plans. “Congress created these plans that provide debt relief to people who make payments based on their income for 20 to 25 years. … What we’re seeing today are some long-needed fixes to that program so that borrowers actually get the relief of Congress intended.”

Preston Cooper, a senior fellow in higher education policy with the Foundation for Research on Equal Opportunity, said the administration has fairly broad authority under the law to set the terms of income-driven repayment plans. But he suggested that some might argue that even if technically legal, Friday’s announcement goes far beyond what Congress intended. “There might be a case against it on those grounds,” said Cooper, who opposed Biden’s original debt-relief plan.

Income-driven repayment plans have been around for years, but have drawn criticism because of poor communication between the Education Department, loan servicers and borrowers. A NPR investigation in 2022 detailed failures in the program.

According to the Education Department, Friday’s action “also addresses concerns about practices by loan servicers that put borrowers into forbearance in violation of Department rules.”

In April 2022, the Education Department said it would offer a one-time adjustment to address any inaccurate payment counts. At the time, the agency said more than 3.6 million borrowers could get additional credit for payments.

“Eligible borrowers will be informed by the Department starting today that they qualify for forgiveness without further action on their part,” the department announced. Types of loans covered include Direct Loans or Federal Family Education Loans held by the Education Department, including Parent PLUS loans.

Vice President Harris said in a statement Friday that she and the president are committed to delivering relief to help borrowers “move forward with their lives - whether they want to start a family, buy a home, or become an entrepreneur.”

“Our Administration will continue to fight to make sure Americans can access high-quality postsecondary education without taking on the burden of unmanageable student loan debt,” she said.