Biden administration announces overhaul of student loan cancellation program, which will impact more than 500,000 borrowers

The Biden administration has announced plans to overhaul the civil service loan forgiveness program, affecting half a million borrowers. (iStock)

The Biden administration announcement Wednesday a redesign of Public Service Loan forgiveness program (PSLF) which she says could affect around half a million student loan borrowers.

The program was created to support public servants such as teachers, nurses, firefighters and others who serve their communities through public service jobs. The program cancels their student loans after ten years of public service, but it has created confusion over the years, prompting the administration to make changes.

“We will provide a time-limited waiver so that student borrowers can count payments from any federal loan programs or repayment plans for remission,” the Department of Education said. “This includes the types of loans and payment plans that were not previously eligible. We will be looking for opportunities to automate PSLF eligibility, give borrowers a way to correct mistakes, and make it easier for members of the military to obtain forgiveness credit while in service. We will combine these changes with an expanded communications campaign to ensure that affected borrowers are aware of these opportunities and encourage them to apply. “

Student loan cancellation is only available for federal student loans. Holders of private student loans may find other ways to reduce their payments, such as refinancing. Visit Credible to see how much you could save on your monthly payments.

BIDEN ADMINISTRATION REVEALS MAJOR STUDENT DEBT PARDON REVISION THIS WEEK

Over 500,000 borrowers take advantage of the changes

To qualify for student debt relief, borrowers must make 120 qualifying payments on time on an income-based repayment plan. But due to the complicated nature of the program’s eligibility rules, many borrowers made loan payments that did not count toward the 120 requirement. This was because the payments had to be made on direct loans and not on Federal Family Education Loans (FFELs) or Federal Perkins Loans.

The Department of Education is now simplifying these rules and retroactively applying payments made by borrowers on any federal loan, not just a federal direct loan, to their remaining balance of required payments.

The ministry estimates that this change will help more than 550,000 student loan borrowers see instant progress toward their 120 payments. The average borrower will see 23 additional payments counted towards their total. And about 22,000 borrowers could have their federal student loans canceled instantly, the department said. These measures will total approximately $ 1.74 billion in student loan forgiveness.

If you have private student loans and don’t qualify for a loan forgiveness, refinancing could help lower your monthly payments. Visit Credible to compare multiple lenders at once and see how much you could save.

SCHUMER RENEWS BIDEN TO CANCEL $ 50,000 IN STUDENT LOAN DEBT PER BORROWER

Other changes from the redesign

Another point of confusion in the PSLF program was the employment of a borrower, which created uncertainty about who was eligible. Under the new changes, about 27,000 borrowers are eligible for an additional $ 2.82 billion loan cancellation by presenting certification of full-time employment for additional periods, the department said.

To date, more than 16,000 borrowers have benefited from a discount under the PSLF program, according to the administration. With these changes, he now predicts that many more will receive credit.

“Borrowers who devote a decade of their lives to public service should be able to count on the promise of forgiveness of public service loans,” said US Secretary of Education Miguel Cardona. “The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their countries. Teachers, nurses, first responders, the military and so many. Civil service workers especially support us amid the challenges of the pandemic. Today, the Biden administration shows that we support them too. “

If you have private student loans and don’t qualify for a student loan forgiveness, consider refinancing to lower your monthly payments. Contact Credible to speak to a student loan expert and get all your questions answered.

Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.

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