Biden announces plan to cancel some student loan balances under $12,000

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WASHINGTON, DC - AUGUST 25: Student loan borrowers stage a rally in front of The White House to celebrate President Biden cancelling student debt and to begin the fight to cancel any remaining debt on August 25, 2022 in Washington, DC. (Photo by Paul Morigi/Getty Images for We the 45m)
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By Ariana Figueroa, Iowa Capital Dispatch

Washington — President Joe Biden announced Friday that some federal student loan borrowers will have their loans canceled under the Department of Education’s new repayment plan.

Starting next month, people who took out under $12,000 in federal student loans and have been repaying those loans for 10 years will get their remaining student loan balance canceled once they enroll in the Saving on a Valuable Education Plan, known as SAVE.

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“This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans,” 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.”

This initiative builds on the Biden administration’s effort to cancel federal student loan debt following last year’s U.S. Supreme Court decision that struck down the White House’s plan for a one-time cancellation of up to $10,000 for federal borrowers. Student loan borrowers who had received Pell Grants — federal aid to help low-income students pay for higher education — could have qualified for an additional $10,000 in forgiveness.

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Hours after the Supreme Court struck down the plan, the White House announced its SAVE plan, along with a one-year off-ramp program that would not report borrowers to creditors if they failed to make loan payments once repayment started back up in October.

“And, in the wake of the Supreme Court’s decision on our student debt relief plan, we are continuing to pursue an alternative path to deliver student debt relief to as many borrowers as possible as quickly as possible,” Biden said. “I won’t back down from using every tool at our disposal to get student loan borrowers the relief they need to reach their dreams.”

So far, 6.9 million borrowers have enrolled in SAVE, and of those borrowers, 3.9 million have a $0 monthly payment.

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Under the new plan, SAVE calculates payments based on a borrower’s income and family size and forgives balances after a set number of years. The Department of Education has estimated that most borrowers will save about $1,000 per year under the new plan.

Borrowers who are in the former payment plan — known as the Revised Pay as You Earn plan — will automatically be enrolled in the SAVE program.

The states with the highest number of borrowers enrolled in the program include Texas, with 591,700, California with 597,300, Florida with 475,800, New York with 374,300 and Pennsylvania with 289,800.

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