The Biden administration will forgive $39 billion of student loan debt for 800,000 borrowers. Here’s what you need to know.

The Biden administration said Friday that more than 800,000 borrowers with $39 billion in federal student loans will receive debt forgiveness.

The Ministry of Education said it will begin notifying borrowers today of the automatic repayment of their debt, which will occur in the next few weeks.

The debt relief comes two weeks after the Supreme Court invalidated the Biden administration’s plan for a sweeping student loan write-off that would help more than 40 million borrowers write off up to $20,000 of debt each. The plan, announced Friday, ties into a separate effort by the Biden administration to improve income-driven repayment (IDR) plans, which are designed to cut monthly student loan payments by tying a person’s payment amount to their income.

Who gets loan forgiveness?

The Biden administration said 804,000 people will know their debt has been paid off. The administration said they were people who were registered with the IDR and had accumulated the equivalent of 20 or 25 years of qualifying monthly payments.

In an update on the loan relief plan, the Department of Education said on Tuesday that it began notifying eligible borrowers via email on July 14 that they are eligible for forgiveness. The agency said that the loans will begin to be repaid 30 days after these messages are sent. Credit service providers will notify people when loans are forgiven.

Borrowers who are provided with assistance under the plan will have repayments on those loans frozen they are repaid.

Why are they getting loan forgiveness now?

The administration said it is now repaying the loans because it wants to correct “historical mistakes” in the management of the IDRs.

Some “qualifying payments under IDR plans, which were supposed to bring borrowers closer to forgiveness, were not taken into account,” the administration said in a statement.

“For too long, borrowers have been caught in the cracks of a broken system that couldn’t accurately track their progress towards forgiveness,” U.S. Education Secretary Miguel Cardona said in a statement.

What happened to income-focused repayment plans?

The Higher Education Act and Department of Education regulations state that a borrower is eligible for forgiveness after making a monthly payment of $240 or $300 under an IDR or standard repayment plan. The different number of months depends on when the borrower first took loans, what loans they had, and the IDR plan in which they were enrolled.

But the “inaccurate calculation of payments” meant that some borrowers were not moving towards loan forgiveness, the administration noted.

What types of loans are covered?

Borrowers with direct loans, federal education loans owned by the Department of Education, and Parent PLUS loans are covered.

Texas has the most borrowers, nearly 64,000 people who qualify for assistance under the Biden administration’s plan, with more than $3 billion in total loans, according to the Department of Education.

How is the length of time calculated?

The Department of Education has stated that it calculates the forgiveness threshold for people who received an IDR forgiveness loan for any of the following periods:

  • Any payment made during the month they were in the redemption status, regardless of whether the payments were partial or late.
  • Any period in which the borrower has spent at least 12 consecutive months waiting
  • Any month of grace for borrowers who have deferred repayment for at least 36 consecutive months
  • Any month spent in deferment, excluding deferment at school, prior to 2013
  • Any month spent in economic hardship or military deferment on or after January 1, 2013.
  • Any months in the above categories that occurred before the loan was consolidated will also count towards forgiveness.

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