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Education Department to Forgive $39 Billion in Student Debt, Anticipating Additional Relief

Discover the Education Department’s groundbreaking student debt forgiveness program to erase $39 billion in student loan debt. Learn about eligibility criteria, automatic forgiveness, future relief prospects, and the importance of proactive repayment strategies.

Education Department Announces $39 Billion Student Debt Forgiveness Program

The Education Department has announced its intention to forgive $39 billion in student loan debt for 804,000 eligible borrowers, with the possibility of the number increasing as the process unfolds. This initiative is a one-time account adjustment to rectify past federal student loan program shortcomings. The department’s statement highlights previous failures, such as student loan servicers placing borrowers in unnecessary forbearances and neglecting to credit them for monthly payments. As a result, borrowers could not progress toward loan forgiveness, which they should have been eligible for after making qualifying payments for 20 or 25 years under income-driven repayment (IDR) plans.

More: Department of Education Proposes New Regulations to Protect Students from Excessive Debt

Key Details and Eligibility Criteria for the Student Debt Forgiveness Program

Betsy Mayotte, President and Founder of The Institute of Student Loan Advisors acknowledges that many borrowers have expressed frustration over paying their loans for an extended period without seeing significant progress or eliminating their balance. This forgiveness program offers a unique opportunity for borrowers to make payments for 20 years or more.

More: Legitimate Ways to Get Student Loan Forgiveness: Exploring Government Programs

Typically, forgiveness is only available to borrowers enrolled in an income-driven repayment plan. However, this one-time adjustment corrects past student loan repayment system flaws. It cancels debt for individuals repaying their undergraduate loans for 20 years or graduate loans for 25 years, even if they have never enrolled in an IDR plan. The adjustment includes periods as far back as July 1994, which makes it an exceptional and unprecedented opportunity.

Who Qualifies for Relief?

The forgiveness program applies to borrowers with direct loans or Federal Family Education Loan Program (FFELP) loans held by the government. This encompasses borrowers with graduate debt and parent PLUS loans. The adjustment considers various periods towards the required 240 or 300 months for forgiveness, including:

  1. Any month spent in repayment, regardless of payment timeliness or plan type.
  2. Time spent in forbearance, whether 12 or more consecutive months or a cumulative total of 36 or more months.
  3. Any month spent in deferment other than in-school deferment before 2013.
  4. Any month spent in economic hardship or military deferments on or after January 1, 2013.
  5. Any months in repayment, forbearance, or qualifying deferment before loan consolidation.

It’s important to note that months spent in default are not eligible for the adjustment. Borrowers with FFELP debt not held by the government do not automatically qualify for the account adjustment. However, they can consolidate their commercially held loans before the end of 2023 to be included.

More: Choosing the Right Federal Student Loan Repayment Plan: A Comprehensive Guide

Key Details about the Adjustment

Here are some essential details regarding the recent announcement:

  1. No application process: Most borrowers need not apply for forgiveness; it will be automatic. Eligible borrowers can expect to receive notifications from the Education Department starting Friday. Enrolling in IDR is not necessary to have loans forgiven through this adjustment.
  2. Additional forgiveness to come: The Education Department plans to identify new groups of eligible borrowers for forgiveness every two months until next year.
  3. No way to expedite forgiveness: Since the adjustment and forgiveness are automatic, there is no method to accelerate the process. If borrowers are not among the initial group receiving forgiveness, they will need to exercise patience as it may take several months or longer to see the adjustment.
  4. Delayed account updates: Discharges will commence approximately 30 days after borrowers receive notification emails about the forgiveness, likely starting around mid-August.
  5. Payment count updates from 2024: Borrowers who do not qualify for total forgiveness will see updates to their payment counts beginning in 2024. Note that payments will restart in October 2023.
  6. Public Service Loan Forgiveness (PSLF) consideration: The adjustment will count months toward PSLF for qualifying borrowers. These months will also contribute to the required 10 years of loan payments for PSLF forgiveness.
  7. Eligibility for Parent PLUS borrowers: PLUS borrowers who do not receive forgiveness may need to consolidate into the direct loan program and enroll in income-driven repayment to have future payments count. Parent PLUS borrowers pursuing PSLF may also qualify for a payment count adjustment toward that forgiveness.
  8. One-time occurrence: It’s crucial to understand that this forgiveness opportunity is unlikely to happen again.

More: Federal Student Loan Borrowers to Benefit from Significant Repayment Changes and Debt Forgiveness

Enrolling in an IDR Plan

While eventual forgiveness may sound appealing, Betsy Mayotte advises borrowers that their primary goal should be paying the least amount over time. Instead of waiting for 20 or more years and accumulating interest, borrowers may benefit from a more aggressive repayment approach. Enrolling in an IDR plan is necessary to secure future forgiveness if there will be a remaining balance after the payment adjustment.

Overall, the Education Department’s forgiveness program is a significant step toward relieving the burden of student loan debt for eligible borrowers.

More: SAVE Repayment Plan: Lower Monthly Payments for Student Loans

It’s important to note that while the forgiveness program provides much-needed relief for many borrowers, it should not be the sole focus. Betsy Mayotte emphasizes that the ultimate goal should be to minimize the total amount paid over time. This may involve considering more proactive repayment strategies rather than relying on forgiveness after 20 or more years. Waiting for forgiveness to kick in can accumulate significant interest, leading to a higher overall payment.

Exploring other repayment options is crucial for borrowers who may not qualify for the current forgiveness program. Income-driven repayment plans can help make monthly payments more manageable based on borrowers’ income and family size. These plans can provide flexibility and potentially lead to forgiveness after a specified period, usually 20 or 25 years.

More: Revised REPAYE Plan to Ease Student Loan Debt Burden

Additionally, borrowers should take advantage of the resources and services available to help navigate the complexities of student loans. Nonprofit organizations like The Institute of Student Loan Advisors can guide repayment options, loan consolidation, and forgiveness programs. Staying informed and seeking assistance can empower borrowers to make informed decisions about their student loans.

It’s important to note that student loan reform and relief efforts are ongoing. While the current forgiveness program is a one-time opportunity, policymakers and lawmakers continue to explore ways to address the student debt crisis and make higher education more affordable. Staying informed about future developments and potential changes in student loan policies can help borrowers stay ahead and make informed financial decisions.

More: How Income-Driven Repayment Plans Can Help You Manage Your Student Loan Payments


In conclusion, the Education Department’s forgiveness program represents a significant step toward alleviating student loan debt for many borrowers. The one-time account adjustment aims to rectify past failures in the student loan program and provide relief to those who have been making payments for an extended period. However, borrowers should also consider alternative repayment strategies and stay informed about future developments in student loan policies. By proactively seeking guidance when needed, borrowers can better manage their student loans and work towards long-term financial stability.

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