Biden Administration Forgives $9 Billion in Student Debt for 125,000 Borrowers

The Biden administration announced the forgiveness of $9 billion in student debt for 125,000 borrowers as student loan repayments resumed after a hiatus of over three years.

This debt cancellation represents the administration’s response to the Supreme Court’s June ruling, which invalidated its plan for widespread student loan forgiveness. The ruling prevented more than 40 million borrowers from erasing up to $20,000 each in debt.

With the broad forgiveness plan blocked, the Biden administration has turned to other methods to alleviate student debt, including the creation of a new income-driven debt repayment (IDR) plan and targeted forgiveness for eligible borrowers. However, as millions of student borrowers begin repaying this month, issues with loan servicers have emerged, including long wait times and unhelpful customer service representatives.

The debt forgiveness will benefit three categories of borrowers:

• Public servants: Approximately 53,000 borrowers enrolled in Public Service Loan Forgiveness programs will receive $5.2 billion in forgiveness. These programs are open to government and nonprofit workers, offering forgiveness after 120 qualifying monthly payments while working full-time for an eligible employer, including teachers, law enforcement professionals, and social workers.
• IDR participants: About 51,000 borrowers in IDR plans with $2.8 billion in debt will receive relief. IDR plans adjust monthly payments based on income, and the Education Department is addressing discrepancies in tracking payments under these plans, granting relief to some borrowers who have been in repayment for over 20 years without receiving their entitled relief.
• Disabled borrowers: Another 22,000 borrowers with $1.2 billion in debt who are totally or permanently disabled will have their debt discharged through a data match with the Social Security Administration.

Notifications have already been sent to IDR participants receiving forgiveness, and the remaining notifications will be dispatched within the next 30 days.

Regarding broader student loan forgiveness, the Biden administration is working on a plan through the Higher Education Act, but this process may take at least a year and could face legal challenges. In the interim, the Education Department continues to grant debt relief to specific borrower groups. U.S. Secretary of Education Miguel Cardona emphasized the aim of rectifying a “broken student loan system” through these efforts, with approximately $127 billion in debt relief approved for about 3.6 million borrowers, including the recent round of forgiveness.