Biden administration’s new student loan forgiveness steps could impact 4M borrowers

The US Department of Education announced on Tuesday it is working to implement steps for nearly 4 million federal student loan borrowers to reach loan forgiveness.

The department estimates these changes will result in immediate debt forgiveness for at least 40,000 borrowers.

“Today, the Department of Education announced steps that will bring borrowers closer to public service loan and income-driven repayment (IDR) forgiveness by addressing historical failures in the administration of the federal student loan programs,” the department said in a press release.

Specifically, the steps reference changes involving forbearances as well as income-driven repayment plans.

LINK: You can read the department’s plan to achieve student loan debt forgiveness for millions of Americans on their website.

The announcement follows a move by the Biden administration earlier this month to freeze federal student loan payments through Aug. 31, extending a moratorium that has allowed millions of Americans to postpone payments during the coronavirus pandemic, according to an administration official familiar with the White House’s decision making.

Student loan payments were scheduled to resume on May 1 after being halted since early in the pandemic. But following calls from Democrats in Congress, the White House plans to give borrowers additional time to prepare for payments.

Democrats on education panels in the House and Senate have urged President Joe Biden to extend the moratorium through the end of the year, citing continued economic upheaval.

Sen. Patty Murray said earlier this month that more time is needed to help Americans prepare for repayment and to rethink the government’s existing system for repaying student debt.

“It is ruining lives and holding people back,” she said in a statement last month. “Borrowers are struggling with rising costs, struggling to get their feet back under them after public health and economic crises, and struggling with a broken student loan system — and all this is felt especially hard by borrowers of color.”

Murray called on the Biden administration to lift all borrowers out of default to provide a “fresh start” following the pandemic.

The decision is being made amid rising concern that large numbers of Americans would quickly fall behind if payments restarted in May.

In March, the St. Louis Federal Reserve Bank warned that resuming loan payments could place a heavy burden on borrowers who faced financial hardship during the pandemic. It said the impact would be hardest on Black families, who are more likely to rely on student loans to pay for college.

The Biden administration has been working to revamp certain programs that allow borrowers to have debt erased. The Education Department has relaxed rules for a notoriously complex program known as Public Service Loan Forgiveness and for another program that erases student debt for Americans with disabilities.

The agency has approved $2 billion in debt cancellation for people who were defrauded by their colleges, plus $1 billion for students who attended the now-defunct ITT Tech for-profit college but left before graduating. Some Democrats have called for additional changes to the student loan system, including an overhaul of repayment plans that critics say are overly complex and difficult to navigate.

RELATED: Education Department erases $415M in student loan debt for 16,000 borrowers

This story was reported from Los Angeles. The Associated Press contributed.

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