President Joe Biden announced on Friday that certain student borrowers will see their debts forgiven starting next month, as the implementation of the new SAVE repayment plan is accelerated by six months.
In August, as part of their initiative to address issues in the student loan system, the Biden-Harris administration introduced the Saving on a Valuable Education repayment plan, or SAVE.
Originally scheduled to commence in July, the loan forgiveness process under the new SAVE repayment plan is being expedited, aiming to offer quicker relief to borrowers, according to President Joe Biden’s announcement on Friday.
This acceleration is part of an initiative to promptly provide borrowers with financial respite from their student debt, as stated by the Democratic president in a formal statement.
February Loan Cancellation Criteria in SAVE Plan
To be eligible for loan cancellation in February, borrowers must be enrolled in the new SAVE plan, have originally borrowed $12,000 or less for college, and have made a minimum of 10 years of payments.
The Education Department has not yet determined the exact number of eligible borrowers for cancellation next month.
Biden introduced the SAVE repayment plan in conjunction with a separate proposal last year, aiming to cancel up to $20,000 in loans for millions of Americans.
While the Supreme Court rejected the widespread forgiveness plan, the repayment plan has not faced the same legal scrutiny at that level.
Unlike the mass cancellation proposal, which was unprecedented, the repayment plan is a modification of existing income-based plans established by Congress over a decade ago.
Loan Cancellation Accelerated to 10 Years
The new repayment plan introduces more favorable terms compared to its predecessors, offering loan cancellation in as little as 10 years, a significant improvement from the previous 20 or 25-year plans.
Monthly payments are also reduced for a substantial number of borrowers.
Individuals with loans exceeding $12,000 will still qualify for cancellation but on a longer schedule, with each additional $1,000 borrowed extending the timeline by one year beyond the initial 10 years.
The maximum repayment period is capped at 20 years for undergraduate loans and 25 years for those with graduate school loans.
The upcoming relief in February is expected to particularly benefit individuals who attended community colleges, aiming to expedite debt forgiveness for this group, according to Education Secretary Miguel Cardona.