Forgiveness is coming early for some federal student loan borrowers.
If you’re on the Saving on a Valuable Education repayment plan, initially borrowed $12,000 or less and have been making payments for at least 10 years, you will be eligible to have any outstanding balances forgiven, a provision that was initially slated to roll out this summer.
But those eligible borrowers will now see their debt forgiven in February, according to the Department of Education. The borrowers will not need to take any further action, ED says.
“This is one strategy in a host of strategies that [the Biden-Harris administration] is doing to make higher education more affordable and more accessible,” Education Secretary Miguel Cardona tells CNBC Make It. “[We want] to address some of the disparities that we found in higher education loan processing and instill confidence in borrowers.”
As part of improvements to income-driven repayment plans, borrowers on the SAVE plan are eligible to have their remaining balances forgiven after as little as 10 years of payments. That’s down from a minimum of 20 years of repayment before forgiveness on older IDR plans.
Those who originally borrowed up to $21,000 can have their debt forgiven early on the SAVE plan. They must make payments for an additional year for every $1,000 borrowed above the $12,000 threshold before their loans are forgiven.
So if you took out $15,000 in loans, you could have your balance forgiven in 13 years on the SAVE plan, rather than 20 years for undergraduate borrowers with larger initial balances.
“We recognize that for for those who take out lower smaller loans, a lot of those folks are the ones that end up without the degree and with debt that they can’t handle and they’re low-income earners,” Cardona says. “This is a subgroup that’s really negatively impacted by the current system, so we wanted to target our support to those who have low debt.”
Borrowers who are already enrolled in SAVE and meet the forgiveness criteria will be…
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