Great news is on the horizon for over 800,000 borrowers as student loan forgiveness is coming!!

Over 804,000 federal student loan borrowers are about to receive a delightful surprise as the U.S. Department of Education is set to automatically erase their debts. Despite President Biden's efforts at widespread debt forgiveness being halted by the Supreme Court, these borrowers will be notified via email that their loans will soon be completely wiped clean.

This forgiveness is a direct result of a promise made by the Biden administration last year, prompted by years of complaints, lawsuits, and an investigation by NPR. The investigation revealed that many long-time borrowers who should have qualified for loan forgiveness under the government's income-driven repayment plans (IDR) had not received it due to mismanagement by the Department of Education and loan servicers.

U.S. Secretary of Education Miguel Cardona expressed the need for such forgiveness, stating, "For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness." In a Friday press release announcing the forgiveness, it was revealed that a total of $39 billion in federal student loan debt will be erased.

Advocates, borrowers, and journalists have long raised concerns about the failures of IDR plans. While these plans promise loan forgiveness after 20 years of payments, a report by borrower advocates in March 2021 discovered that out of 4.4 million borrowers who had been repaying their loans for at least 20 years, only 32 had their debts canceled under IDR.

One of the significant problems contributing to this situation is the difficulty in enrolling in IDR plans, designed to provide a safety net for low-income borrowers. Consequently, loan servicing companies often placed financially distressed borrowers into long-term forbearance as it was a more manageable process for the companies' call center workers to handle over the phone. While forbearance offered temporary relief from payments, interest continued to accrue, worsening borrowers' financial situations.

An NPR investigation conducted in April 2022, based on previously undisclosed Education Department documents, shed further light on problems associated with the department's handling of IDR plans. It was revealed that several loan servicing companies failed to track borrowers' progress toward forgiveness, a fact known by the department. Additionally, payment histories frequently suffered damage and incompleteness when borrowers were transferred from one servicer to another, a common practice.

In response to these issues, the Biden administration committed to conducting a one-time "account adjustment" for federal student loan borrowers in the spring. This adjustment grants borrowers retroactive credit towards loan forgiveness for the months they spent in long-term forbearance. Even those who were never enrolled in an IDR plan are now receiving or will soon receive retroactive credit towards forgiveness, regardless of the partial or late nature of their payments, loan type, or repayment plan, as stated by the Department of Education.

This comprehensive review of borrower accounts is far from over and will continue until 2024. The recent forgiveness of $39 billion significantly bolsters the Biden administration's previous debt relief efforts, which now total at least $116 billion. It demonstrates the Education Department's ability to provide targeted relief to vulnerable borrowers, even in the face of the Supreme Court's recent rejection.

Citation: (Source: NPR)