About 64,000 Texas borrowers will be exempted from federal student loans after a U.S. Department of Education review concludes they are eligible for benefits.
The video above is from an earlier report.
The total amount of debt forgiven will be $3.1 billion, with an average of $48,500 per borrower.
The move has nothing to do with President Joe Biden’s now-defunct student loan forgiveness plan. was suspended by the U.S. Supreme Court last month. Applies only to borrowers who received federal loans more than 20 years ago.
According to the education ministry, the measures taken last week are more remedial than pardon. It will affect borrowers whose debts should have been written off but were not due to “past administrative failures,” the education ministry said.
The Department of Education began a review of all federal loans last year and has since identified 804,000 borrowers nationwide who would have been eligible for debt forgiveness had they had a so-called “income-driven repayment plan.” The combined debt of the two companies is about $39 billion.
An income-based repayment plan calculates monthly repayments based on the borrower’s annual income, ensuring that the loan repayments are not an undue burden on the family budget. Borrowers make monthly payments for 20 to 25 years, depending on the type of loan. After that period, any outstanding balance on the loan will be forgiven.
All borrowers identified in the study, including 63,730 in Texas, the state with the most borrowers benefiting in last week’s announcement, were notified that their debts would be automatically canceled within 30 days.
More people will be exempt from debt as part of the review. The Department of Education will continue to search for eligible borrowers for debt forgiveness through next year.
All borrowers who qualify for an Income Repayment Plan and have made 240 or 300 monthly payments, depending on the type of federal loan, are eligible for forgiveness. To determine eligibility, the Department of Education will consider each month in which loan payments are made, as well as the period during which the borrower has requested a suspension of payments due to financial hardship or illness. Months in which the borrower fails to repay the loan are not considered for meeting the exemption criteria.
Winston Berkman-Breen, legal director of the Center for Student Borrower Protection, said the Department of Education’s review was aimed at rescuing borrowers whose debt collection agencies weren’t advising badly or weren’t forgiven because of the bureaucracy.
For example, an unemployed borrower struggling to pay off a loan may have asked a loan collection agency to suspend payments until the situation improves. Doing so means that the borrower cannot approach debt forgiveness in the meantime. Berkman-Breen said the person should have been advised to enroll in an income-based repayment plan, which would likely eliminate the need to make monthly repayments, and that time under that plan would also count towards reaching the exemption threshold, Berkman-Breen said.
Berkman Breen also said borrowers must renew their enrollment in the income-based repayment plan annually. Many people don’t. As such, such unplanned payments are no longer subject to forgiveness.
The corrective action taken last week will benefit borrowers in this situation by counting payments made under repayment plans and valid grace periods towards meeting the exemption criteria.
The education ministry’s overhaul, aimed primarily at modifying programs that should benefit low-income borrowers, has had little success. According to one study, only 157 loans have been forgiven as of 2021 since the first income-driven repayment plan was implemented in 1994. Report of the United States Government Accountability Office.
“For too long, borrowers have been caught in a crack in a broken system that has failed to accurately track their progress toward forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement last Friday. “By correcting past administrative failures, we are making sure everyone gets the forgiveness they deserve.”
Direct loans and federal home education loans held by the Department of Education are eligible for the waiver. This includes Parent PLUS and Consolidation Loans.
Last week’s remedies came two weeks after the U.S. Supreme Court overruled President Biden’s student loan forgiveness plan. Influenced 1.4 million Texans A person for whom forgiveness has already been granted. The plan called for $10,000 debt forgiveness for all borrowers with incomes below $125,000 and $20,000 debt forgiveness for borrowers with Pell subsidies and incomes below the same threshold.
Upon learning of the court’s decision, Mr. Biden said he would be determined to find ways to provide relief to increasingly burdened student-loan borrowers.
Since 2007, the average student loan for borrowers has increased from $18,000 to almost $38,000. Rising tuition fees, rising costs of living and stagnating wages are making it harder for families and students to pay for tuition, said Michelle Shepherd, senior director of college affordability at the Institute for College Access and Success, who has ballooned student loans.
“It’s kind of the perfect storm,” Shepard said. “It is very difficult for most students, especially low- and middle-income students, to go to school without debt.”
In another effort to ease the burden of student loans, the federal government recently launched a new income-based repayment plan. Save Your Precious Education (SAVE) Plan, a revision of the previous program, that eases monthly payments on federal loans and forgives loans of $12,000 or less after 10 years of repayment. Experts believe this is the most generous income-driven repayment plan ever.
Some of the SAVE plan’s provisions are due to come into effect this summer before borrowers are required to resume monthly payments on their loans next October after a nearly three-year hiatus ordered as part of the COVID-19 relief measures.
The Department of Education estimates that borrowers’ gross repayments will decrease by an average of 40% under the SAVE plan. Low-income borrowers will see an 83% reduction, while black, Hispanic and Native American borrowers will, on average, see their lifetime gross payments cut in half, according to the agency.
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