President Joe Biden’s $39 billion plan to forgive student debt has cleared a major legal hurdle. A federal judge dismissed a lawsuit seeking to block the plan, which was brought by two conservative think tanks, the Mackinac Center for Public Policy and the Cato Institute. The lawsuit challenged the legality of the Saving on a Valuable Education (SAVE) plan, which aims to count past deferment and forbearance periods as if borrowers had made payments during that time.
The plaintiffs argued that canceling student debt through income-driven repayment plans would undermine the Public Service Loan Forgiveness (PSLF) program and harm non-profit organizations that benefit from it. However, Judge Thomas Ludington dismissed the case, stating that the conservative groups did not demonstrate how they would be harmed by the plan.
Under the SAVE plan, borrowers will see relief from their student loans even before they were scheduled to start making payments. The Department of Education has already begun notifying over 800,000 borrowers that they are eligible for automatic discharge of their federal student loans under the plan.
President Biden expressed his satisfaction with the legal victory and highlighted his administration’s commitment to fighting for hardworking families and fixing issues in the student loan system. He also emphasized the substantial debt cancellation that has already been approved for millions of Americans.
It’s important to note that the SAVE plan only applies to federal student loans, and borrowers with private student loans will not benefit from this initiative. However, they may consider refinancing their loans to lower their monthly payments.
In addition to the student debt forgiveness plan, the Department of Education has also made changes to its income-driven repayment plans. These changes are expected to result in a collective $39 billion in federal student loan debt being forgiven. The revised plans will calculate monthly payment amounts based on borrowers’ income and family size, providing immediate relief for those with lower incomes.
For borrowers earning $32,800 a year or less, their monthly payment will be reduced to zero dollars. Furthermore, borrowers with an original balance of $12,000 or less will have any remaining balance forgiven after making ten years of payments. The maximum repayment period before forgiveness will increase by one year for every additional $1,000 borrowed.
While federal student loan relief is significant, it’s worth noting that private student loan borrowers will not be eligible for these government initiatives. Those struggling with private student loan payments can explore options like refinancing their loans for a lower interest rate.
In summary, President Biden’s student debt forgiveness plan has cleared a legal hurdle, allowing for $39 billion of relief to borrowers. The SAVE plan will provide immediate relief and credit for past deferment and forbearance periods. While the plan has faced legal challenges, the case was ultimately dismissed. The Department of Education has already started notifying eligible borrowers, bringing substantial student loan relief to millions of Americans. Private student loan borrowers should explore alternatives like refinancing to alleviate their financial burden.
