The Department of Education announced on Friday that more than 804,000 borrowers will automatically receive a combined $39 billion in student loan forgiveness as part of an effort to rectify historical flaws in the the servicing of federal student loans.
The loan discharges are a response to corrected inaccuracies in counting qualifying monthly payments under income-driven repayment (IDR) plans. In the past, a significant number of payments made under these plans that should have moved borrowers closer to forgiveness were not accounted for. Borrowers qualify for forgiveness after accumulating 20 or 25 years of qualifying months.
Secretary of Education Miguel Cardona said this action aims to right historical wrongs caused by administrative failures and promises to continue leveling the playing field in higher education.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Cardona said in a statement. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve.”
The loan forgiveness encompasses Direct Loans or Federal Family Education Loans held by the Department, including Parent PLUS loans. Several factors will be considered in establishing eligibility for forgiveness, including periods of repayment, forbearance, and deferment. These corrected counts aim to offset inaccurate past payment records that resulted in borrowers losing progress towards loan forgiveness.
Eligible borrowers will be notified that they qualify for forgiveness without further action required on their part. The process of discharging loans will commence 30 days after emails are sent, with all discharges expected to be completed within the coming weeks.
“This is not a fix to anything going forward,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade association for student loan servicers, in a published report. “This is a one-time fix where they’re counting statuses that were not permitted to be counted in the past.”
