Biden admin says 3.6M borrowers are closer to student loan forgiveness through IDR reform

The Education Department is changing its policy around income-driven repayment (IDR) forgiveness, according to a press release. (iStock)

The Department of Education announced Tuesday that it's retroactively fixing "longstanding failures" in federal student loan programs like income driven repayment (IDR) to bring millions of Americans closer to debt forgiveness, according to a press release

The department's recent actions come after criticism of the IDR program, which limits a borrower's monthly student loan payment based on discretionary income and family size. After a repayment term of 20 or 25 years, the remaining loan balance is discharged — but data has shown that few borrowers have actually qualified for forgiveness under IDR.

Now, the Federal Student Aid (FSA) office is conducting a "one-time account adjustment" that will bring about 3.6 million IDR borrowers months or years closer to achieving debt forgiveness, and several thousand will be immediately eligible

- Education Secretary Miguel Cardona

Keep reading to see who benefits from the Biden administration's changes to income-driven repayment. If you have private student loans that aren't eligible for IDR plans, you might consider refinancing to lower your interest rate. You can visit Credible to compare student loan refinance rates for free without impacting your credit score.


FSA's actions ‘restore the promise of IDR plans’ with debt forgiveness

Income-driven repayment assures debt forgiveness after a certain number of loan payments, but the program hasn't always delivered on this promise. Research from the Brookings Institute found that student loan borrowers face difficulty with IDR plans, resulting in low enrollment rates and few loan discharges under the program.

The Biden administration will fix these "longstanding failures" by:

  • Counting certain long-term forbearances as payments toward IDR loan discharges and Public Service Loan Forgiveness (PSLF). As part of this, FSA will conduct a "one-time revision of IDR-qualifying payments for all Direct Student Loans and federally-managed Federal Family Education Loan Program (FFEL) loans."
  • Ending "forbearance steering," which is when student loan servicers place borrowers into forbearance rather than educating them about IDR plans. The Consumer Financial Protection Bureau (CFPB) will also audit loan servicers' forbearance use to increase oversight.
  • Reforming FSA's payment tracking so that borrowers and loan servicers can keep "accurate records" of their progress toward debt forgiveness under IDR plans.


"These actions once again demonstrate the Biden-Harris administration’s commitment to delivering meaningful debt relief and ensuring federal student loan programs are administered fairly and effectively," Cardona said. 

Through these changes, the department estimates that more than three million student loan borrowers will be closer to reaching loan discharges under IDR, with several thousand becoming eligible for forgiveness immediately. Additionally, 40,000 more borrowers will receive debt cancellation under the PSLF program.

Still, the department's announcement won't necessarily impact all federal student loan borrowers, including those who aren't enrolled in an IDR plan as well as those with private student loan debt. If you don't meet the eligibility requirements for federal student debt cancellation, you might consider refinancing your private loans while interest rates are low. You can learn more about student loan refinancing on Credible.

Biden has canceled $17B worth of student debt since taking office

As a presidential candidate, Joe Biden campaigned on canceling at least $10,000 worth of federal student loan debt per borrower. Although the president has not yet been able to deliver on his campaign promise of widespread student loan forgiveness, his administration said it has forgiven $17 billion in debt for approximately 725,000 borrowers since he took office. This includes:

  • $7.8 billion for 400,000 borrowers who have a total and permanent disability (TPD).
  • $6.8 billion for 113,000 public servants through the limited PSLF waiver.
  • $2 billion to 105,000 borrowers under the borrower defense program.
  • $1.2 billion in closed school discharges for borrowers who attended ITT Technical Institute.


However, the future of broad student loan forgiveness remains unclear. Although Senate Majority Leader Chuck Schumer recently said that Biden "seems more open to it than ever before," this isn't necessarily a promise of debt cancellation. 

If you're not eligible for federal student loan forgiveness programs like IDR or PSLF, you may be looking for alternative repayment plans. One method is to refinance to a private student loan with more favorable terms. Keep in mind that refinancing your federal student loans would make you ineligible for IDR, deferment and administrative forbearance, as well as other federal student loan cancellation measures. 

Still, refinancing to a lower interest rate may help you reduce your monthly payment amount, get out of debt faster and save thousands in interest charges over time. You can use Credible's student loan refinance calculator to determine if this strategy is right for your financial situation. Additionally, you can browse current interest rates from private lenders in the table below.


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