(The Center Square) – More than 18,000 Missourians will be eligible for $956 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 Biden’s previous student loan forgiveness plan to be unconstitutional.
An estimated 836,000 Missourians – 14% of the state’s population of six million people – have outstanding student loan debt and 8.1% 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 $35,400 among Missouri borrowers ranks 21st out of 50 states, but is below the national average of $36,200.
The department released data on the number of borrowers who are eligible for automatic loan repayment under modified Income-Driven 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.
A media release from 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. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs … 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.”
