Between legal disputes and payment pauses, you might be struggling to keep track of what's happening with student loan debt cancellation. And if you are, that's because what's going on is confusing. And amid the uncertainty, a new path toward debt relief may have just hit your inbox.
Last Thursday, the Department of Education emailed millions of borrowers with at least one outstanding federal student loan, updating them on their eligibility for the latest debt relief plan.
"Today, the Biden-Harris administration takes another step forward in our drive to deliver student debt relief to borrowers who've been failed by a broken system," US Secretary of Education Miguel Cardona said last week in a statement.Â
This latest debt relief announcement is the administration's Plan B for student loan forgiveness, said Mark Kantrowitz, a federal student aid expert and CNET Money Expert Review Board member. If you receive an email, it will show you the amount of forgiveness you'll receive if this latest plan prevails.
The Biden-Harris administration published the first draft for this new student debt relief plan in April. If finalized, the plan would bring the total number of borrowers eligible for relief to 30 million.
What's this mean for you? If you're eligible for debt relief through the latest plan, you'll be notified by the Department of Education. If you're not interested in receiving debt relief, you can opt out by contacting your student loan service before Aug. 30.
Do you qualify for the latest student loan forgiveness plan?
If you have federal student loans and meet one of the below conditions, you might qualify for full or partial relief under the Biden-Harris administration's latest plan.
- You have a loan balance that's grown significantly due interest charges
- You hold undergraduate federal student loans and entered repayment more than 20 years ago (25 years for those with graduate loans)
- You would have been eligible for forgiveness under an existing income-driven repayment plan, but have not yet applied
- You've experienced financial hardship or attended a school that lost its federal funding
Will this debt relief plan face legal hurdles?
Like previous widespread student loan relief plans, Kantrowitz expects the administration's newest attempt at forgiveness to face pushback.
"Once the final rule is published, it is likely to face Republican lawsuits that seek to block it," Kantrowitz said. "This will tie it up in the courts for months."
Kantrowtiz noted that the timing of this effort of this announcement ahead of the upcoming election may be to demonstrate a contrast between the two candidates' takes on student loan forgiveness.Â
What does this mean if I'm enrolled in SAVE?
The administration's Saving on a Valuable Education plan is still on hold temporarily. Kantrowitz expects this decision will be appealed to the US Supreme Court. In the meantime, if you're enrolled in SAVE, your payments have been put on hold until the legality of this repayment plan is sorted.
"Borrowers should know that the recent court rulings are temporary stays, pending appeal," Kantrowitz said. "They are not final."
But Kantrowitz expects SAVE may hold up in court. The relief offered through SAVE is based on existing regulatory authority that Congress provided to the Department of Education. And the Department of Education has already used this regulatory authority twice before in similar circumstances -- once with the PAYE repayment plan and again to create the REPAYE plan, which is now being replaced with SAVE, he added.
That said, the decision could still go either way. If you're enrolled in SAVE, it's best to plan for both scenarios.
"They should not count on loan forgiveness until they actually receive forgiveness," Kantrowitz said.
