After months of stalling and a significant step back inflicted by the Supreme Court last month, President Joe Biden scored a crucial victory on Friday when his administration announced that it would automatically cancel the debt of hundreds of thousands of borrowers.
The debt cancellation, which will benefit 804,000 student loan borrowers, will add up to a total of $39 billion in relief. It's made possible as a result of previous actions undertaken by the federal government to fix "longstanding failures in the student loan programs," according to the Department of Education.
Under the new repayment plans, borrowers on most plans are entitled to have their debt forgiven after 20 or 25 years of payments, depending on what and when they borrowed, and their plan type.
Friday's announcement comes weeks after the Supreme Court struck down Biden's student loan forgiveness plan which would have delivered debt relief to some 37 million people. The court said that the president didn't have the authority to cancel such a significant amount of debt without Congress' approval.
According to the Biden administration, the move goes to correct years during which borrowers who were entitled to debt forgiveness often didn't get it, as the payments that should have moved them towards becoming debt-free weren't accounted for.
The fixes to the income-driven repayment (IDR) plans will now ensure that all borrowers have an accurate count of the number of monthly payments that qualify for debt forgiveness.
"For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness," said Secretary of Education Miguel Cardona.
"Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers. By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans.
This Administration will not stop fighting to level the playing field in higher education."
The hundreds of thousands of borrowers who will benefit from this decision will be notified in the coming weeks, according to a statement released on Friday by the Department of Education.
The department reports that in total, the Biden administration has approved more than $116.6 billion in student loan forgiveness for more than 3.4 million borrowers.
Update 07/14/23, 9:30 a.m. ET: This article was updated with additional information.
