The Biden administration has discharged another $1.2 billion in student loan debt under a key provision of the Saving on A Valuable Education, or SAVE income-driven repayment plan.
Last month, the president accelerated a provision that provides immediate debt cancellation for borrowers with an original loan balance of $12,000 or less who have been in repayment for 10 years.
Today, the Education Department announced more than 153,000 borrowers received an automatic debt discharge.
“We are once again sending a clear message to borrowers who had low balances: if you’ve been paying for a decade, you’ve done your part, and you deserve relief,” Education Secretary Miguel Cardona said in a press release.
Around 7.5 million borrowers are enrolled in the SAVE plan, of which 3.4 million were automatically transferred from a previous version of income repayment to SAVE, 2.8 million are new enrollees to income-driven repayment plans, and 700,000 switched from other IDR plans, according to an Education Department spokesperson.
Read more: Can you change your student loan repayment plan?
Borrower advocates applauded the latest announcement.
“Low-balance borrowers are finally getting the relief they deserve. Student debt cancellation results in freedom from a financial burden that has weighed thousands of borrowers down,” Natalia Abrams, president of the Student Debt Crisis Center, said in a statement. “This is more proof that student debt cancellation is the path forward to achieve an affordable higher education system in this country again.”
One of the benefits of enrolling in an income-driven repayment (IDR) plan is that after 20 or 25 years of repayment — depending on the plan — any remaining balance is discharged. Under SAVE, that timeline is shortened to 10 years for borrowers with smaller balances.
Unlike other income-driven repayment plans, borrowers do not have to be low-income to qualify for SAVE.
Other key aspects of SAVE that make it different from other income-driven repayment plans include:
The most borrowers must pay toward their undergraduate loans is 5% of their discretionary income, down from 10%.
No borrower making less than 225% of the federal poverty level will have to make a monthly payment.
Borrowers won’t be charged with unpaid monthly interest, so balances won’t grow if they make their payments — even if the monthly payment is $0 because their income is low.
The decrease in discretionary income from 10% to 5% on undergraduate loans will take effect in July.
Since taking office, the Biden administration has discharged almost $138 billion for more than 3.9 million borrowers.
This includes $56.7 billion for 793,000 borrowers using the public service loan forgiveness (PSLF) program and waiver, $45.6 billion for 930,500 borrowers under income-driven repayment plans, $11.7 billion for 513,000 borrowers with total and permanent disability, and $22.5 billion for 1.3 million borrowers who were defrauded.
“For too long the system did not work for borrowers, even when they were eligible for loan forgiveness,” James Kvaal, undersecretary for Education, said in a statement. “Today, we have approved loan relief for nearly 3.9 million borrowers who were counting on the Biden-Harris Administration to fix the broken student loan system and provide the forgiveness they earned and have been waiting for.”
Ronda Lee is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on X @writesronda
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