Over 26K borrowers in Michigan are eligible for student loan debt forgiveness ⋆

More than 26,000 Michiganders will have their student loan debts forgiven, according to the U.S. Department of Education.

The department announced Friday that it had begun contacting the more than 800,000 borrowers who are eligible to have their student loans discharged who qualify under fixes to Income-Driven Repayment (IDR) plans implemented by President Joe Biden’s administration. The fixes include providing an accurate count of payments to borrowers who qualify for forgiveness after 20 years or more of payments.

Nationally, $39 billion will be forgiven after the department’s administrative failures led to the number of payments not being tracked amongst other factors that impeded forgiveness. 

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Borrowers have fallen through the cracks and suffered under a broken system, U.S. Secretary of Education Miguel Cardona said in a news release Friday.

“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Cardona said.

Michigan is amongst the top 10 states for most borrowers eligible for forgiveness, with the combined value of loans to be discharged valued by the department at over $1.2 billion.

Debts will be wiped out within 30 days of eligible borrowers being notified by the Department of Education.

The plan includes borrowers with Direct Loans or Federal Family Education Loans held by the department (including Parent PLUS loans of either type) who have reached a forgiveness threshold specified by the department.

A 2022 NPR investigation found numerous problems with the agency’s handling of IDR plans, which are meant to help low-income borrowers. Loan servicers failed to keep track of borrowers’ progress toward forgiveness and payment histories were not properly transferred from one loan servicer to another.

Under IDR, after 20 years of payments, a borrower’s loan plan should be forgiven. But a 2021 report from the National Consumer Law Center found that more than 4 million borrowers had been making payments for at least 20 years, but only 32 had their debts canceled under the plan.

Because of this issue, the Department of Education announced in 2022 that it would conduct an adjustment and fix past inaccuracies.

The Department of Education in early January announced its plans to overhaul the income-driven repayment plan.

Under the new plan, monthly payments would decline to 5% of a borrower’s income — down from 10% — and the repayment timeline for loan forgiveness would be decreased to 10 years from 20 or 25 if the initial loan is less than $12,000.

The announcement Friday from the Department of Education comes a few weeks after the U.S. Supreme Court ruled against the Biden administration’s one-time student debt relief plan that would have knocked out up to $20,000 of student loan debt for 40 million borrowers.

The Department of Education is now going through a rulemaking process to cancel that student loan debt under the Higher Education Act, an action likely to face the same legal challenges as the initial debt relief program.

Under the Biden administration, the Department of Education has canceled about $116 billion in student loan debt for borrowers who were misled by for-profit institutions, borrowers with disabilities and those with loans through Public Service Loan Forgiveness.

​​More than 43 million Americans have student loan debt, and the Federal Reserve estimates that the total U.S. student loan debt is more than $1.76 trillion.



authored by Anna Liz Nichols
First published at https%3A%2F%2Fmichiganadvance.com%2F2023%2F07%2F18%2Fu-s-dept-of-ed-over-26k-borrowers-in-michigan-are-eligible-for-student-loan-debt-forgiveness%2F

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