Over 38K Georgians to receive student loan debt relief under Biden plan
Biden admin to wipe out billions in student loans
Thousands of loan holders got the news they've been waiting for on Friday. The Biden administration said it'll wipe out their student loans totaling more than $39 billion. That's about almost $50,000 per borrower. Critics are livid. They call the move a backdoor around a Supreme Court ruling last month.
Thousands of Georgians will have their student loan debt forgiven under a new plan by the Biden Administration.
White House officials say that 38,590 people across Georgia will receive more than $2.1 billion in what they're calling an "income-driven repayment (IDR) forgiveness."
It's part of a $39 billion new response to the Supreme Court rejecting President Joe Biden's original plan.
Officials say the new effort will address "historical inaccuracies" in counting payments that could qualify toward a different income-driven repayment plan.
"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 earlier in July. "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."
Under the administration's action, borrowers who have been repaying their loans for 20 years or more can see some or all of their loans forgiven.
Borrowers eligible for the plan will not have to take any action to receive debt forgiveness.
The Department of Education has begun to notify eligible Georgians and borrowers will also be notified by their loan servicer after their debt is discharged.
What is an income-driven repayment plan?
The U.S. Education Department offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. But if borrowers have difficulty paying that amount, they can enroll in one of four plans that offer lower monthly payments based on income and family size. Those are known as income-driven repayment plans.
Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased.
What is Biden's SAVE Plan?
As part of his debt relief plan announced last year, Biden said his Education Department would create a new income-driven repayment plan that lowers payments even further. It became known as the SAVE Plan, and it’s generally intended to replace existing income-driven plans.
Borrowers will be able to apply later this summer, but some of the changes will be phased in over time.
Right away, more people will be eligible for $0 payments. The new plan won’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person. The cutoff for current plans, by contrast, is 150% of the poverty line, or $22,000 a year for a single person.
Another immediate change aims to prevent interest from snowballing.
As long as borrowers make their monthly payments, their overall balance won’t increase. Once they cover their adjusted monthly payment — even if it’s $0 — any remaining interest will be waived.
Other major changes will take effect in July 2024.
Most notably, payments on undergraduate loans will be capped at 5% of discretionary income, down from 10% now. Those with graduate and undergraduate loans will pay between 5% and 10%, depending on their original loan balance. For millions of Americans, monthly payments could be reduced by half.
Next July will also bring a quicker road to loan forgiveness. Starting then, borrowers with initial balances of $12,000 or less will get the remainder of their loans canceled after 10 years of payments. For each $1,000 borrowed beyond that, the cancellation will come after an additional year of payments.
For example, a borrower with an original balance of $14,000 would get all remaining debt cleared after 12 years. Payments made before 2024 will count toward forgiveness.
The Associated Press contributed to this report.