This decision is part of a broader strategy to alleviate the financial burden of student loans, particularly for public sector workers such as firefighters and teachers who have served for over a decade.
According to Fox Business, "The latest round of student debt cancelation brings the total amount canceled under Biden to $136.6 billion for more than 3.7 million Americans." This follows the U.S. Supreme Court's decision to block Biden's initial student loan relief program last year, which would have cost over $400 billion.
Last week, President Biden announced his intention to cancel student loans for borrowers who have taken out less than $12,000 and have been in repayment for 10 years. In a statement, Biden said, "From Day One of my Administration, I vowed to fix the student loan system and make sure higher education is a pathway to the middle class – not a barrier to opportunity. Already, my Administration has cancelled student debt for 3.6 million Americans through various actions."
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He further added, "Starting next month, borrowers enrolled in SAVE who took out less than $12,000 in loans and have been in repayment for 10 years will get their remaining student debt cancelled immediately."
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In August 2022, Biden announced a significant forgiveness of student loans, cancelling over $400 billion in student loans. This equated to up to $10,000 in student debt for borrowers earning $125,000 a year or less, and up to $20,000 for recipients of Pell Grants.
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However, the Supreme Court ruled 6-3 against Biden's student loan relief program. In response, the Department of Education implemented a forbearance program to cancel $39 billion in student loans by counting non-payments as payments for a certain period. Notably, this is not a typical forbearance program as borrowers will not have to repay 'missed' payments or make up the difference of 'reduced' payments, and no interest will accrue on any of the missed payments.
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Federal student loan payments were suspended in March 2020 due to the Covid pandemic, with payments set to resume in October 2023.
In October, the Department of Education announced it is withholding $7.2 million from a student loan servicer due to billing statement errors that affected 800,000 borrowers.
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The Missouri Higher Education Loan Authority was penalized for sending out 'late' billing statements to 2.5 million borrowers as repayments resumed. As a result, 800,000 borrowers were put in forbearance and will not have to make payments until the issue is resolved.
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