The Biden Administration has extended the student loan pause until August 31st. Shortly after making this announcement, the Department of Education (DOE) has taken the initiative to fix widespread failures in student loan programs. Most notably, the DOE is taking steps for public service loans and income-driven repayment (IDR) forgiveness.
The first step is to look at the Public Service Loan Forgiveness (PSLF) Program. The Federal Student Aid (FSA) approximates about 40,000 borrowers will have immediate debt cancellation. Through IDR, several thousand borrowers with older loans will receive loan forgiveness. The agency also estimates that about 3 million borrowers will receive additional credit towards IDR forgiveness, for approximately 3 years.
Income-Driven Repayment plans aim to set a monthly, set payment amount that is based on your income and family size. There are four different plans under this program:
Revised Pay As You Earn Repayment Plan (REPAYE Plan)
Pay As You Earn Repayment Plan (PAYE Plan)
Income-Based Repayment Plan (IBR Plan)
Income-Contingent Repayment Plan (ICR Plan)
Unfortunately, if your loan has defaulted, it would not be eligible for the repayment plans under the IDR.
“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” said U.S. Secretary of Education Miguel Cardona. “Today, the Department of Education will begin to remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers enrolled in IDR plans. These actions once again demonstrate the Biden-Harris administration’s commitment to delivering meaningful debt relief and ensuring federal student loan programs are administered fairly and effectively.”
Coming Up
Cardona and his team will have 3 main objectives moving forward.
Ending “forbearance steering
Tracking progress toward IDR forgiveness
Tackling student debt
The DOE plans to end forbearance steering by requiring servicers to inform their borrowers about their options to avoid loan delinquencies if they are struggling with making payments.
IDR forgiveness tracking will be improved by showing borrowers their IDR payment count on StudentAid.gov. Additional fixes won’t start taking effect until 2023.
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