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The Biden administration announced last week that it would fast-track its plan to deliver student loan forgiveness for certain borrowers in its new repayment plan.
However, some people may have questions about the news, which was not exactly straightforward. For example, while the relief will be automatic for many, others will need to take steps to qualify for it.
Meanwhile, “many are unaware of the opportunity,” said Elaine Rubin, director of corporate communications atĀ Edvisors.
Here’s what to know about the development for borrowers.
Relief is limited to a select group
The latest round of relief is a result of the U.S. Department of Education’s new repayment program, called the Saving on a Valuable Education, or SAVE, plan. Borrowers were first able to enroll in SAVE, which the Biden administration has called “the most affordable repayment plan ever created,” last August.
The SAVE option reduces the monthly federal student loan payments for undergraduate borrowers from 10% of discretionary income to 5%, and shortens the timeline to forgiveness for those with small balances from the usual required 20 years or 25 years. Those who took out $12,000 or less in their undergraduate or graduate postsecondary studies get any remaining debt erased after just a decade.
It is the latter provision the Biden administration is fast-tracking. Due to the timeline of regulatory changes, it was originally expected to go into effect this summer.
Instead, the U.S. Department of Education said last week that, “borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts canceled immediately starting next month, with no action on their part.”
As of early January, 6.9 million borrowers were enrolled in the new SAVE plan, according to the Department of Education.
“A borrower who is already enrolled in the SAVE plan should see this forgiveness automatically,” Rubin said.
Borrowers not in SAVE need to take steps to qualify
Borrowers who…
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