Biden Speeds Up Timeline for Student Loan Cancellation

The Biden administration plans to create a shorter timeframe for student borrowers to achieve education debt forgiveness, a plan it said would benefit community college students in particular.

Starting in February, those who are on the Saving on a Valuable Education (SAVE) plan, a program that reduces monthly student debt payments by linking the reimbursements to an individual's income and size of their family, and borrowed $12,000 or less for college, will see their debt canceled after 10 years of payments, according to the Department of Education.

The government said it hopes the accelerated timeline for debt forgiveness will help students who attended community colleges as they tend to typically borrow smaller amounts. The Education Department also anticipates that those who are struggling with their loans tend to also owe about $12,000 or less, so the lesser time for relief would be particularly beneficial to that group, as well.

"The Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before," Secretary of Education Miguel Cardona said in a statement.

A borrower may receive debt forgiveness after another year of payment for every $1,000 they owe above the $12,000 initial debt, part of a plan to reduce the time it would take to clear the debt.

"As the Administration was writing the SAVE plan, it didn't seem fair to make someone who attended college for only a semester or two to repay their loans for 20 or 25 years, like other borrowers on the SAVE plan do," Under Secretary of Education James Kvaal said. "For every $1,000 above $12,000 you can get forgiveness after an additional year. So if you borrowed $13,000 you can get forgiveness after 11 years."

The timeline of the new approach is based on the original loan, not what a borrower owes now, the Education Department said in its statement.

There are nearly 7 million borrowers who have signed up for the SAVE plan, according to the department.

SAVE emerged after a plan by the Biden administration to cancel up to $20,000 of student debt was struck down by the U.S. Supreme Court last summer. After a pause during the COVID-19 pandemic, interest on the debt resumed in September, and repayments on the principal loan kicked in the following month. Analysts said the average payment toward student loan for households is $200 to $300 per month, about 5 percent of the U.S. median salary.

The government's student debt forgiveness effort through various plans has canceled $132 billion of loans for more than 3.6 million borrowers, according to the Education Department.

There are more than 40 million Americans who are in student debt, and federal student loans that are outstanding are close to $1.65 trillion, according to the Education Data Initiative.