Education Department issues loan forgiveness for certain borrowers, extends recertification deadline
The U.S. Department of Education (DOE) announced on February 21 that it will forgive $1.2 billion in loans for nearly 153,000 eligible borrowers.
This applies to borrowers enrolled in a Saving on a Valuable Education (SAVE) Plan who have made at least 10 years of payments and have originally taken out $12,000 or less for college.
The administration has been contacting eligible borrowers if they qualify for this forgiveness, and they will not need to take any further action. Loan servicers have been processing the forgiveness and borrowers will see this reflected on their accounts.
Currently, 7.5 million borrowers are enrolled in the SAVE plan, the income-driven repayment (IDR) plan that replaced the Revised Pay as You Earn (REPAYE) plan.
The SAVE plan is part of the White House’s approach to forgiving educational loans since the U.S. Supreme Court blocked the Biden administration's student loan debt relief plan in June 2023. The court ruled that the Secretary of Education did not have the authority to establish a forgiveness program that would have canceled about $430 billion in student debt.
The DOE then took a different approach, applying account adjustments to all qualified IDR plan borrowers, an estimated 804,000 people, at the end of last year.
In addition, new benefits to the SAVE plan went into effect in summer 2023. These included lower payments through increased income exemption, interest benefit to keep a borrower’s balance from growing, and excluding spousal income for borrowers who are married and file taxes separately.
The Department of Education has been emailing borrowers who can become eligible for this forgiveness if they switch to SAVE. Borrowers who think they meet these criteria can sign up for the SAVE plan online. Borrowers are also encouraged to research all available repayment options based on their loan types in order to make an informed decision.
The DOE will implement the remaining full benefits of the SAVE plan in July, which will reduce a borrower’s monthly payments from 10% of their discretionary income to 5%.
The Pay as Your Earn (PAYE) plan will sunset on July 1. Borrowers already using PAYE will not be affected, but new borrowers will not be able to re-enroll. For borrowers who want to switch to a SAVE plan, their unpaid interest will not capitalize.
In addition, the deadline for student loan borrowers to recertify their income annually to remain in an IDR plan has been extended, according to an announcement from the department in late February. These student loan borrowers now have until late September at the earliest to update their income and family size to meet the new November 1 deadline, depending on their official IDR annual recertification date.
“Normally, borrowers are required to provide their updated income and family size annually to remain enrolled in an IDR plan. During the COVID-19 payment pause, we paused the requirement for you to provide us with your income and family size information in order to keep your IDR plan up to date. We are now announcing the end date of this pause as part of our continued support for borrowers as they return to repaying student loans,” the announcement states.
Those who have not recertified but were supposed to by March might have seen their monthly payment increase and the department is working to revert their monthly payment to its previous amount until the new recertification deadline. Those whose payments increased after recertification will also be reverted to their previous payment amounts.
A version of this story appears in the May 2024 print issue of JAVMA