As the Biden administration strives to provide relief to student loan borrowers, Vice President Kamala Harris has highlighted their success in implementing over $170 billion in debt forgiveness for nearly five million borrowers. Despite the Supreme Court striking down President Biden’s initial debt cancellation plan, officials have utilized various tools such as regulatory updates and temporary waivers to expand and improve existing forgiveness programs. The Education Department is now finalizing another mass debt relief initiative that could benefit over 25 million borrowers.
One upcoming deadline that borrowers should be aware of is the opt-out deadline for Biden’s new student loan forgiveness plan, which is set for August 30. The Education Department recently alerted 40 million borrowers about the new plan, aimed at providing relief to specific groups of borrowers such as those facing high interest accrual, individuals eligible for forgiveness under other programs, and former students of schools that lost federal aid eligibility due to standards violations. While the plan is expected to be automatic, borrowers have the option to opt out by contacting their servicers before the deadline.
Another critical date is September 1, when the Education Department aims to complete the IDR Account Adjustment, which allows borrowers to receive credit toward their 20- or 25-year loan forgiveness term under Income-Driven Repayment plans. Over a million borrowers have already received $51 billion in forgiveness under this initiative. The program is temporary and is expected to conclude by the September 1 deadline. Borrowers who meet the forgiveness threshold will receive a discharge, while others will retain their IDR credit and continue repaying under an IDR plan.
For borrowers in default on their student loans, the Fresh Start program provides an opportunity to exit default and transition to regular repayment, with the program ending on September 30. This initiative allows defaulted borrowers to receive IDR credit towards their loan forgiveness term, including for the duration of their default period since March 2020. Borrowers who exit default before the deadline can benefit from the payment count adjustment and receive credit for defaulted periods. After the deadline, borrowers who rehabilitate out of default can still qualify for forgiveness programs like Public Service Loan Forgiveness.
Following the Fresh Start deadline, the Education Department will resume collections activities against defaulted borrowers, including wage garnishment, Social Security benefits offset, and tax refund intercepts, along with financial penalties and negative credit reporting. The deadline serves as a critical opportunity for borrowers to take advantage of the forgiveness programs offered and avoid potential adverse consequences of default. Students are encouraged to review the various forgiveness initiatives available and take necessary actions before the upcoming deadlines to benefit from the relief measures being implemented.
