Finance & Economics

Joe Biden Administration to Forgive $7.7 Billion in Student Debt

The administration of the President of the United States Joe Biden on Wednesday, May 22, announced that student loans for $7.7 billion will be forgiven to more than 160,000 borrowers.

Joe Biden Administration to Forgive $7.7 Billion in Student Debt

The mentioned decision is an action within the framework of a larger attempt by the US leadership to reduce the burden of education debt for households.

The specified relief, according to media reports, is the result of improvements by the United States Department of Education to its income-driven debt repayment plans and a public loan forgiveness program.

US Education Secretary Miguel Cardona says the presidential administration is still pushing for efforts to bring student debt relief to millions of people across the country.

The loan forgiveness announced on Wednesday includes $5.2 billion for 66,900 borrowers who applied for public service loan forgiveness and $1.9 billion for 39,200 borrowers who were included in income-driven repayment plans. Another $613 million is earmarked for 54,300 borrowers under the new loan repayment option. This initiative, proposed by the Joe Biden administration, is known as the Saving on a Valuable Education, or SAVE, plan. The mentioned option provides for the forgiveness of a student loan after 10 years for those who originally borrowed $12,000 or less. SAVE plan is driven by income.

The total amount of student loan forgiveness in the United States committed as part of the Joe Biden administration has already reached $167 billion. These measures affected 4.75 million borrowers.

It is worth noting that last summer, the US Supreme Court overturned Joe Biden’s large-scale plan to cancel student debts. After this decision, the White House began to actively explore its existing authority to reduce borrowers’ accounts. The Education Department has already established loan forgiveness options that are hard to access.

Traditionally, it has been very difficult for borrowers to navigate the options for assistance. Many of them complain that they are not provided with statutory assistance. This is what consumer advocates say.

Income-driven repayment plans result in the cancellation of the loan after a certain period. At the same time, the Department of Education often did not have a proper accounting of borrowers’ timelines. In 2022, the Department announced its intention to review these accounts.

It is also worth noting that since the beginning of May, the Department of Education has already discharged loans held by 317,000 people who attended the Art Institutes.

Moreover, currently, most of the Joe Biden administration’s strategy of forgiving runaway interest on loans that grew far beyond the original amount borrowed is still pending. So far, work is continuing on the approval of new rules. At the same time, the administration of the President of the United States has already stated that more than 25 million people can apply for relief under the mentioned initiative. The public comment period on the specified part of the strategy ended last week. More than 65,000 comments have been received on the initiative.

As we have reported earlier, SoFi Debuts Student Loan Tool.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.