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One of the major benefits of the Biden administration’s new student loan repayment plan is that it cancels the debt for certain borrowers — those who took out $12,000 or less — after a decade in repayment. Under the old plans, loan forgiveness didn’t come until 20 years or 25 years of payments.
On Friday, the administration announced some additional good news for these borrowers: It will move to cancel the debt for those eligible as soon as February, nearly six months ahead of schedule.
The U.S. Department of Education also said it will try to get as many qualifying borrowers to sign up for its Saving on a Valuable Education, or SAVE, plan, starting Friday, “particularly those who may be able eligible for immediate forgiveness.”
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“This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans,” President Joe Biden said in a statement. “And, it’s part of our ongoing efforts to act as quickly as possible to give more borrowers breathing room so they can get out from under the burden of student loan debt, move on with their lives and pursue their dreams.”
So who exactly qualifies for this relief? Here’s what we know.
How forgiveness under the SAVE plan works
When the Biden administration created its new SAVE plan, which it billed to student loan borrowers as “the most affordable repayment plan ever created,” it offered more favorable terms to certain people.
While the usual timeline for loan forgiveness would be 20 years or 25 years, those who took out $12,000 or less in their undergraduate or graduate postsecondary studies would get any remaining debt erased after just a decade.
As of early January, 6.9 million borrowers were enrolled in the new SAVE plan, according to the Education Dept. People were first able to sign up for the plan last August.
Due to the timeline of regulator changes, however, some of the provisions of the new program weren’t expected to go into effect until this summer. Those include the reduction of monthly payments for undergraduate borrowers from 10% of discretionary income to 5%, and the shortened timeline to forgiveness for those with small balances.
The latter benefit is what the Biden administration is implementing earlier, promising eligible borrowers the relief as soon as next month.
Which borrowers may benefit from early forgiveness
If you can answer “yes” to these three questions, you likely qualify:
- Are you enrolled in the SAVE plan?
- Did you borrow $12,000 or less in student loans?
- Have you been in repayment for a decade or longer?
If you’re not currently signed up for the SAVE plan, experts recommend you do so as soon as possible to expedite your forgiveness. Months during the pandemic-era payment pause count on the 10-year timeline, whether or not you were paying down your student debt.
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