When the Supreme Court struck down President Joe Biden’s $400 billion student debt relief plan, he remained determined. At a June 30 press conference he told reporters, “We need to find a new way.”
Two weeks later, the Department of Education announced the details: it will cancel $39 billion in Federal student loans. On July 14, they began to notify more than 804,000 borrowers about automatic 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 U.S. Secretary of Education Miguel Cardona. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve.”
Eligible borrowers use income-driven repayment plans, which set bills based on income and family size. Some bills were as low as $0 per month, but the New York Times reported that “loan servicers often placed struggling borrowers on forbearance — a move that kept their loans in good standing but meant that interest continued accruing, inflating borrowers’ balances.”
In 2017, the government sued one of its biggest student loan servicers over this tactic. The company stopped servicing federal student loans in 2021.
The federal government has paused student loan payments since March 2020 for pandemic relief. In October, more than 45 million borrowers will resume payments. They share a debt of $1.6 trillion.
According to the National Center for Education Statistics, the amount borrowers owe varies widely. While borrowers owe an average of 78% of their initial loan, Black borrowers owe 105%. Four years after graduation, 48% of Black student borrowers and 17% of white student borrowers owe more than their initial amount. Women owe 66% of all student loan debt despite representing 58% of college students. Borrowers who identify as LGBTQ+ owe an average of $6,000 more than those who do not.
The Biden-Harris administration has led a consistent effort to cancel student debt. That included a plan last year to relieve 200,000 borrowers who said their universities defrauded them. In total, the administration has forgiven over $116.6 billion for more than 3.4 million borrowers.
