The White House announced a new round of $7.4 billion in student loan forgiveness, relieving nearly 277,000 borrowers of their debt. The latest attempt to reduce the amount owed for education means President Joe Biden has now erased a total of $153 billion in debt, affecting 4.3 million people.
This round of student loan forgiveness will greatly help borrowers enrolled in federal loan forgiveness. programs including saving on valuable education (SAVE) Mapwhich offers lower monthly payments based on income, and income-driven repayment plans, which are based on a percentage of the borrower’s monthly discretionary income. Those eligible for the latest loan forgiveness will begin receive emails Friday.
Of the $7.4 billion forgiveness cycle, $3.6 billion will go to 207,000 borrowers enrolled in the SAVE plan and $3.5 billion will be saved for 65,800 people enrolled in loan-driven repayment plans. income. That leaves about $300 million for 4,600 people enrolled in the program. Public service loan forgiveness program which will also benefit from debt forgiveness.
The SAVE plan differs from other income-driven loan plans in that it generally has lower monthly payments and aims to limit loan balance growth, which can occur under other income-driven plans due to unpaid interest. Under the SAVE plan, “all remaining accrued interest will be covered by the government, so your principal balance will not increase,” according to the Federal student aid.
Biden continued to cancel his student loans after the Supreme Court last summer blocked his major project which would have wiped out 400 billion dollars in student loans. It would have canceled up to $20,000 in federal student debt for tens of millions of borrowers. The plan has been backed by leading Democrats in Congress, including Elizabeth Warren And Chuck Schumer… and they even pushed for more dramatic cancellation plans. But it has been controversial since it was first announced in August 2022. The plan has spawned several legal challenges, with two related cases brought before the nation’s highest court, arguing that Biden did not have the authority to cancel the debt without Congressional approval. The original the plan was ultimately stuck in a 6-3 decision in June 2023.
But last week, Biden revealed its backup plan to bring the total number of people whose debts have been forgiven to 30 million since the administration’s efforts began three years ago.
How endemic is student debt?
Currently, more than 43.2 million Americans have federal student loan debt, totaling more than $1.6 trillion, according to Educational Data Initiative, a higher education research group, the average borrower owes $37,000. Income-driven replacement plans, including the SAVE plan, provided debt relief for more than 996,000 borrowers to the tune of $49.2 billion.
The problem of student debt will only get worse as the price of higher education continues to rise. The average price of tuition at a public four-year college is 23 times higher than in 1963, according to an Education Data Initiative report.
And as the costs of higher education rise, so do Biden’s commitments to reducing borrowers’ accumulated debt. He extended a break on student loan repayments for three years between March 2020 and September 2023; in November 2021, it canceled $11 billion in student loans, and last December announced a $4.8 billion student debt relief program for more than 80,300 people.
More recently, when he was at a stop of the campaign on April 8 in Madison, Biden unveiled a new plan to help 25 million borrowers reduce their debt, with an offer to send at least $5,000 in relief to 10 million borrowers. He also proposed making community college free so that “more Americans can access the promise of higher education.”
“The current student loan system and repayment programs do not reach all borrowers, and for many Americans, student loans continue to be a barrier,” Biden said in an April 8 statement. statement.
