Breaking Down Biden’s Latest $7.4 Billion Batch of Student Loan Forgiveness

The Biden administration approved another wave of student loan forgiveness last week, greenlighting at least $7.4 billion in debt relief to over a quarter million borrowers. 

“Today’s announcement shows—once again—that the Biden-Harris Administration is not letting up its efforts to give hardworking Americans some breathing room,” said U.S. Secretary of Education Miguel Cardona in a statement on Friday. “As long as there are people with overwhelming student loan debt competing with basic needs such as food and healthcare, we will remain relentless in our pursuit to bring relief to millions across the country.”

The announcement is just the latest batch of debt relief announced by the Biden administration, covering a number of separate initiatives. There’s still time for borrowers to qualify for loan forgiveness and other relief, although the window for certain programs may be closing soon.

Here’s a breakdown of the latest loan forgiveness approvals and what borrowers need to know.

Small debt borrowers account for half of the $7.4 billion in forgiveness

Roughly half of the $7.4 billion in student loan forgiveness announced last week was through so-called “early” student loan forgiveness under the new Saving on a Valuable Education (SAVE) plan.

This plan, unveiled by the Biden administration last fall, aims to make monthly payments more affordable based on a borrower’s income and family size. Payments under SAVE are often lower than what borrowers would pay under other income driven repayment (IDR) options. 

Like all IDR plans, SAVE allows for student loan forgiveness after 20 or 25 years in repayment. But one unique feature of SAVE is that borrowers can be eligible for loan forgiveness sooner if they took on relatively small amounts of student debt — in some cases, in as little as 10 years.

“The shortest repayment term before forgiveness is 10 years (120 monthly payments) for individuals who borrowed $12,000 or less,” says Education Department guidance. “The repayment term increases for every $1,000 you borrowed above this amount. This means that even if you borrowed more than $12,000, you could still be eligible to receive forgiveness in less than 20 years.”

To benefit from SAVE’s accelerated student loan forgiveness timeline, borrowers must first enroll in the plan. 

“If you have made enough payments to be eligible for this early forgiveness but are not enrolled in the SAVE Plan when the forgiveness is implemented, you must first enroll in the SAVE Plan,” says the department. “At that point, the remaining balance of your loans could be forgiven within two to three months after your servicer informs you that your enrollment in the SAVE Plan has been completed.”

Legal challenges to the SAVE plan are already underway

A coalition of Republican-led states has filed two parallel legal challenges to the SAVE plan, seeking to block its benefits and overturn the program. It’s too soon to know whether those lawsuits may stop further relief under the program. Already, at least eight million borrowers have signed up for SAVE, according to the Biden administration.

IDR account adjustment led to $3.5 billion in student loan forgiveness

The Biden administration also approved another $3.5 billion in student loan forgiveness through the IDR account adjustment, a one-time temporary initiative that can advance borrower’s progress toward 20- or 25-year loan forgiveness under IDR plans. More than 65,000 borrowers received discharges in the latest wave of approvals.

The IDR account adjustment allows borrowers to get credit toward IDR loan forgiveness for past periods that may not have otherwise counted, such as time spent in repayment under other plans, as well as certain periods of deferment and forbearance. Periods before loan consolidation can also be counted. The account adjustment is designed to remedy historical problems with IDR programs, including misinformation, forbearance-steering and inadequate recordkeeping. 

Nearly a million borrowers have already received student loan forgiveness under the account adjustment, which is being administered on a rolling basis. Borrowers who don’t quite reach the point of qualifying for loan forgiveness immediately can still retain their IDR credit; the Education Department is set to publish IDR payment counts for these borrowers later this year. 

The IDR waiver is winding down

The program is starting to wind down, and key deadlines are approaching. In particular, borrowers who have non-government-held federal student loans may need to apply to consolidate their loans via the federal Direct consolidation program before June 30, 2024, in order to qualify. 

“The adjustment will be applied to most borrowers’ accounts in 2024. It will be applied only to Direct and FFEL Program loans held by ED [the Education Department],” says published guidance. “If you have commercially held FFEL or any Perkins or HEAL loans, we encourage you to consolidate them by [June 30], 2024, to benefit from the payment count adjustment.” (note: quote updated to reflect deadline change)

Borrowers should carefully review official guidance on the program to determine if they may be able to benefit. Those who need to consolidate their loans via the Direct loan program can apply online via StudentAid.gov. 

Another sweeping round of forgiveness through PSLF benefits 4,000+ borrowers

More than 4,000 borrowers were also approved for student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. PSLF can provide a complete discharge of federal student loans after 120 “qualifying payments” (the equivalent of 10 years) for borrowers who have committed to working for certain nonprofit or government organizations.

The Biden administration has implemented a number of PSLF-related initiatives and reforms to improve access and broaden relief under the program. These include:

• The limited PSLF waiver, which temporarily relaxed PSLF rules to allow more loan periods to count toward forgiveness. This initiative ended in 2022.
• The IDR account adjustment extends many of the benefits of the limited PSLF waiver.
• Regulatory changes, going forward, allow certain deferment and forbearance periods to count toward PSLF, slightly broaden the definition of qualifying employment and provide more flexibility in how borrowers make monthly payments. 

When President Biden first took office in January 2021, only a few thousand borrowers had been approved for PSLF. According to the most recent data released by the Education Department, nearly 900,000 borrowers have now received student loan forgiveness under the program.

Borrowers pursuing PSLF should carefully review the program’s requirements. To receive PSLF credit, borrowers must certify their employment. The Education Department advises that people use the online PSLF Help Tool to complete that process.