(The Center Square) – More than 15,000 Coloradans will be eligible for $805 million in federal student loan forgiveness under a new plan by President Joe Biden and the U.S. Department of Education.
Last week, the department began notifying 804,000 borrowers across the country of their automatic eligibility for loan forgiveness. The program comes after the U.S. Supreme Court ruled in June that Biden’s previous student loan forgiveness plan was unconstitutional.
An estimated 818,800 Coloradans have outstanding student loan debt and 6.6% are at least 90 days past due on payments, compared to 7.5% of borrowers nationwide, according to a 2021 analysis by the Federal Reserve Bank of New York. The average outstanding balance of $36,800 among Colorado borrowers is 14th highest in the 50 states, but only $600 above the national average.
The department released data on the number of borrowers who are eligible for automatic loan repayment under modified income-based repayment plans. A total of $39 billion in federal student loans will be automatically discharged in the coming weeks.
Depending on the type of loan and the borrower’s income, eligible loans must have accumulated the equivalent of 20 or 25 years of repayments.
The department stated the loan forgiveness is an attempt to “address historical failures in the administration of the Federal student loan program in which qualifying payments made under income-driven plans that should have moved borrowers closer to forgiveness were not accurately accounted for.”
The Higher Education Act allows loan forgiveness after making 240 or 300 monthly payments on an income-driven plan or a standard repayment plan. The number of payments vary based upon when the loan was taken out, the type of loan and the repayment plan. The department stated inaccurate payment counts resulted in borrowers losing progress toward loan forgiveness.
“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” Under Secretary James Kvaal said in a statement. “Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”
The department also stated the action addresses concerns about practices by loan servicers that put borrowers into forbearance in violation of federal rules.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement when announcing the program last week. “… By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans.”
In April, the department announced more than 3.6 million participants in the Ford Direct Loan program would receive at least three years of credit toward loan forgiveness and some will have loans automatically forgiven. One requirement is for participants to be part of the Public Service Loan Forgiveness program, which forgives the remaining balance on direct loans after 120 qualifying payments while working full-time for a qualifying employer.
Those employers include the “U.S. military, public elementary and secondary schools, public colleges and universities, public child and family service agencies, and special governmental districts (including entities such as public transportation, water, bridge district, or housing authorities),” according to the department’s student aid website.
