Almost 64,000 Texas borrowers will have their federal student loans forgiven after a U.S. Department of Education review concluded they qualified for the benefit.
The total amount to be forgiven will be just roughly $3.1 billion, average of $48,500 per borrower.
The move is unrelated to President Joe Biden’s now-defunct student debt forgiveness plan, which was blocked by the U.S. Supreme Court last month. This forgiveness plan only applies to borrowers with federal loans taken more than two decades ago.
The plan states It will affect borrowers whose debts should have been canceled but weren’t due to “past administrative failures,” according to the Department of Education.
Income-driven repayment plans calculate borrowers’ monthly payments based on their annual income to make sure repaying their loans doesn’t represent an undue burden on their finances. Borrowers make monthly payments for 20 to 25 years, depending on the type of loan. After that term, whatever balance remains pending on their loan is forgiven.
All of the borrowers identified in the review — including 63,730 in Texas, the state with the most borrowers benefiting from last week’s announcement — were notified that their debt would be automatically canceled in 30 days.
The department of education has stated that it will continue looking for those who qualify for the debt forgiveness until next year.
All borrowers who would’ve qualified for an income repayment plan and have reached 240 or 300 monthly payments — depending on the type of federal loan they have — will be eligible for forgiveness. To determine eligibility, the Department of Education will take into account every month in which loan payments were made, but also periods of time in which the borrower requested a pause in payments because of economic hardship or illness. Months in which the borrower defaulted on their loan will not be considered toward meeting the forgiveness threshold.
The Department of Education’s review is meant to fix a program that is supposed to benefit mainly low-income borrowers but has yielded few results. Since the first income-driven repayment plan was implemented in 1994, only 157 loans had been forgiven as of 2021, according to a report by the U.S. Government Accountability Office.
The Department of Education estimates that borrowers on average would see their total repayments fall by 40% under the SAVE plan. Lower-income borrowers would see a reduction of 83% and, on average, Black, Hispanic and Native American borrowers would have their total lifetime payments cut in half, according to the agency.
