President Biden Expedites Student Loan Cancellations with February Launch of SAVE Repayment Plan
In a significant move to alleviate the financial strain on borrowers, President Joe Biden’s administration has announced an accelerated commencement of student loan cancellations set to begin in February. This swift initiative is part of the newly introduced SAVE repayment plan, originally scheduled for July, aiming to provide quick relief to individuals burdened by student debt.
President Biden emphasized the urgency, stating, “to act as quickly as possible to give more borrowers breathing room,” underscoring the administration’s commitment to addressing the challenges associated with student loans.
Eligible borrowers for this expedited loan cancellation must be enrolled in the SAVE plan, have borrowed $12,000 or less for college, and have a minimum payment history of 10 years. The Education Department is yet to determine the exact number of eligible borrowers in February.
The SAVE repayment plan, introduced alongside a broader initiative to cancel up to $20,000 in loans for millions of Americans, offers more favorable terms than its predecessors. Unlike previous income-driven repayment plans requiring 20 or 25 years of payments, the SAVE plan provides relief in as little as 10 years, reducing monthly payments for a substantial number of borrowers.
Borrowers with amounts exceeding $12,000 remain eligible for cancellation but follow an extended timeline. For each additional $1,000 borrowed beyond the threshold, an extra year of payments is added on top of the initial 10 years, with a maximum repayment period of 20 years for undergraduate loans and 25 years for graduate school loans.
The forthcoming relief is particularly targeted at individuals who attended community colleges, as Education Secretary Miguel Cardona expressed the intent to put community college students “on a faster track to debt forgiveness than ever before.”
While facing criticism from some Republicans who argue that the new repayment plan benefits wealthier Americans with college degrees, the Biden administration asserts that the initiative primarily benefits those with smaller loan balances, addressing the struggles faced by borrowers who didn’t complete their degrees.
Starting next month, the Education Department will automatically wipe away balances for eligible borrowers enrolled in the SAVE plan, taking a proactive approach to ease the financial burden on those grappling with student debt. The comprehensive provisions of the plan, including the reduction of payments to 5% of discretionary income, will roll out in stages, further transforming the landscape of student loan repayment.
Simultaneously, the administration continues to explore additional avenues for widespread loan cancellation, actively working on proposals to provide targeted relief to specific groups of borrowers.
