Category: Financial Concerns

Ed Dep’s Loan Forgiveness for Borrowers with 20 Years of Repayment Derailed

The Biden administration through the Education Department is all set to discharge $39 billion worth of student loans belonging to hundreds of thousands of borrowers. It’s actually part of the Biden administration’s pursuit of debt relief measures but met with legal impediments and pushback from the GOP.

Debt Relief to Compensate Compliant Longstanding Borrowers

The Ed Dep’s federal student debt relief is deemed as a way of compensating student borrowers for the prolonged failure of the Education Department and the loan servicers contracted, to properly manage the income-driven federal repayment program. The program had promised borrowers the chance of having the entire remaining balance of their debts erased after making payments for twenty (20) or twenty-five (25) years.

However, relatively only a few of the student loan borrowers received forgiveness from the federal income-driven repayment program. Federal and state regulators found out that the loan servicers for student loans were inappropriately pushing student borrowers to take out long-term forbearances that actually do not work toward loan forgiveness. Moreover in most cases, the Education Department was remiss in properly tracking monthly payments that served as records and bases for loan forgiveness over time.

In April 2022, the Ed Dep announced that they have retroactively adjusted and updated borrower accounts. The purpose of which is to give credit to student debtors who could have made qualifying repayments under the income-driven payment program. The update had placed 804,000 student loan accounts in the threshold of twenty or twenty-five years of repayments, which automatically entitled the borrowers to loan forgiveness in accordance with the income-driven repayment program.

Conservative Filed Legal Petitions to Block the EdDep from Awarding Debt Forgiveness

Although the Education Department announced it will be carrying out the loan forgiveness discharges soon, legal cases have been filed against such actions.

Conservative groups known as the Mackinac Center for Public Policy and the Cato Institute have petitioned a federal judge to immediately issue an order to block the loan forgiveness action. The groups contend that the loan relief could be detrimental to their recruitment efforts. The two institutions argue that the Biden administration is clearly abusing its authority, since the Supreme Court had earlier struck down the broader federal student loan forgiveness plan.