WILMINGTON, DE – DECEMBER 23: Education Secretary Miguel Cardona sent notices to 40 … [+]
The Biden administration sent emails to thousands and thousands of borrowers on Thursday informing them of an upcoming mass student loan forgiveness program that has been within the works for greater than a yr. The email provides details concerning the latest program and offers borrowers the chance to opt out of it before it rolls out in the autumn.
“STOP SCROLLING,” said US Education Secretary Miguel Cardona in a Statement on X on Thursday. “I am sending information on student debt relief to 40 million borrowers this morning.” He urged borrowers to “read the email for more information on potential debt relief!”
The latest debt cancellation initiative, touted by Biden officials as a alternative for the plan the Supreme Court rejected last summer, will deal with 4 groups of borrowers, a lot of whom qualify for automatic debt cancellation without having to file an application. Here’s what borrowers have to know.
Who would qualify for student loan forgiveness under the brand new Biden plan?
The Biden administration has been working on a brand new student debt cancellation plan since June 2023. At the time, the Supreme Court ruled that Biden’s first attempt at mass debt cancellation was illegal and went beyond what Congress had authorized. For that plan, the administration had relied on the HEROES Act, a 20-year-old law that permits exemptions from federal student loan repayment requirements in response to national emergencies.
This time, the Biden administration is invoking a “compromise and agreement” provision within the Higher Education Act that has been routinely utilized by each Democratic and Republican administrations to repay or cancel federal student loan debt, albeit on a much smaller scale than what officials are actually attempting to do.
The proposed plan targets student loan forgiveness for 4 groups of borrowers. These include those that have experienced significant interest accrual or capitalization (causing the loan balance to grow uncontrollably); borrowers who attended substandard schools and performed poorly of their studies; those that are eligible for existing loan forgiveness plans but haven’t applied; and borrowers who first began repayment greater than twenty years ago. A fifth group of borrowers may very well be eligible for loan forgiveness based on hardship, but that pathway will likely be rolled out individually at a later date.
The Department of Education “is in the process of making the final decision on who will be eligible for student debt relief under the program,” the official guidance says, suggesting that the administration should adjust some eligibility criteria in the approaching weeks.
What does the notice say about student loan forgiveness for 40 million borrowers?
Notices sent today by the Department of Education provide an summary of the brand new student loan forgiveness plan and offer the chance to opt out of it.
If you receive an email from the U.S. Department of Education, “don’t delete it,” says a video message Secretary Cardona shared on X on Thursday.
“The email came from Secretary Cardona and the subject line read ‘Upcoming Student Debt Relief from the Biden-Harris Administration,'” the video continues. “If you don’t see the email right away, check your spam and junk folders as a precaution.” The notifications include an summary of the categories of borrowers who may very well be eligible for debt relief under the initiative.
Borrowers currently don’t have to take any motion to qualify for relief. However, step one is to choose whether or not they need to opt out.
“The first step is simple,” the department’s video message says. “Read the email. If you are interested in relief, you don’t need to do anything. If you are not interested in relief, call your servicer and tell them you don’t want it.” The deadline for doing so is August 30, in accordance with the department. However, opting out could also end in the borrower being “temporarily” excluded from having their student loan forgiven under the IDR plans.
Although it shouldn’t be explicitly stated within the department’s video message, the “opt-out” notice is probably going being delivered to borrowers in anticipation of automatic forgiveness of their student loans. The Department of Education has enough data to discover most of the borrowers who would qualify for relief under the primary 4 categories without requiring them to submit a proper application. By not opting out through the 30-day opt-out period, borrowers are effectively agreeing to automatic relief once this system takes effect.
Student loan forgiveness could occur this fall
It is becoming increasingly clear that the Biden administration plans to implement the brand new student loan forgiveness plan soon, probably this fall.
“As part of the Biden-Harris administration’s efforts to relieve student debt, the U.S. Department of Education plans to provide debt relief to certain borrowers this fall,” the department’s updated guidelines said.
Implementing the autumn goals can be likely why the Department of Education is sending out email notifications now, with an opt-out deadline of August 30. The first day of fall is September 22, giving the department loads of time to process opt-out requests before relief can begin, presumably in late September or sometime in October.
Nearly 5 million borrowers have already received debt relief under other programs
Despite last yr’s Supreme Court ruling, the Biden administration has managed to push through nearly $170 billion in student loan forgiveness for nearly five million borrowers through other initiatives, including improvements to the Public Service Loan Forgiveness program, a retroactive fix to income-driven repayment plans, group relief for borrowers harmed or defrauded by their schools, and updated rules for borrowers with serious medical impairments.
But several of the Biden administration’s student debt relief initiatives are facing legal challenges. Last month, a federal appeals court blocked the SAVE plan, a brand new income-driven repayment option that may lower payments and speed up debt forgiveness for certain borrowers. The ruling has thrown much of the federal student loan system into chaos. Many observers expect Biden’s latest student debt relief program to face a court challenge as well.
Correction August 2, 2024: An earlier version of this text stated that the Department of Education’s notice was sent on Friday. In fact, it was sent on Thursday, August 1, 2024.
