The education ministry announced on Tuesday amendments to a number of student loan programs, giving thousands of borrowers immediate relief from student loan debt and bringing millions more years closer to forgiving their student loans. This comes as the Biden administration continues to investigate the cancellation of student loan debt for millions of Americans.
Changes are being made to public service loan forgiveness programs and income-based repayment plans. According to the education department, the amendments will provide immediate forgiveness to 40,000 borrowers and bring at least 3.6 million borrowers closer to relief by at least three years through income-based payments.
“Student loans have never been intended to be a life sentence, but it certainly feels that way for eligible debtors who are eligible,” Education Minister Miguel Cardona said in a statement. He said the move was beginning to “eliminate years of administrative failure” and demonstrated the administration’s commitment to “meaningful debt relief and ensuring that federal student loan programs are administered fairly and efficiently”.
A review of the Federal Student Aid Service found that some service providers put patrons facing financial difficulties in violation of regulations requiring borrowers to receive clear and accurate information about their ability to stay out of debt. This happened even when monthly payments on income-based repayment plans could make their payments so low from zero dollars, the education department said.
To address the problem, the Ministry of Education will make a one-off adjustment to the account to take into account certain long-term concessions to income and public service forgiveness. The changes will be automatically applied to borrowers’ accounts later this year. Borrowers who have been targeted for shorter-term deductions will also be able to seek account reviews. At the same time, the administration will strengthen oversight of service providers’ ability to enroll borrowers in tolerance, including working with the Consumer Financial Protection Bureau to conduct regular audits of patience.
Meanwhile, in reviewing the income-based payout program, the education ministry found “significant shortcomings” that suggest borrowers are missing out on progress towards forgiveness. The Federal Student Aid Service will perform a one-time revision of income-based payments so that each month the borrower has made the payments will be reported for forgiveness, no matter which repayment plan they are on. This includes payments made before the loan was consolidated. For those who have made the required number of payments – usually 120 – the loans will be automatically canceled.
In an attempt to permanently eliminate the problem, the education department will issue new guidelines for service providers. From next year, borrowers will be able to log in to their accounts through the Federal Student Aid Office to see their own progress toward income-based reimbursement forgiveness online. In addition, the education department plans to take steps to further simplify the reporting of payments by allowing more loan statuses to be reported to the income-based simplification.
The effort, announced Tuesday, comes after the Biden administration has already canceled more than $ 17 billion in debt to about 725,000 borrowers since President Biden took office.
Earlier this month, the White House also announced an extension of the federal student loan break until Aug. 31. White House spokeswoman Jen Psaki recently said the administration would decide between now and then to cancel the student loan debt or the break would be further extended.
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Sarah Yuol-Weiss
CBS News reporter covering economic policy.
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