Some Student Loan Borrowers May Be Eligible for Forgiveness Sooner

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Next month, federal student loan borrowers may have their debt canceled if they are enrolled in the SAVE plan, initially borrowed $12,000 or less and made 10 years of payments.

Federal student loan borrowers who initially took out smaller loan amounts may be eligible for debt cancellation sooner than they anticipated.

Starting in February, people enrolled in the Biden administration’s new income-driven repayment plan known as SAVE who originally borrowed $12,000 or less for college and have made at least 10 years of qualifying monthly payments will immediately have any remaining debt wiped out, Education Department officials said on Friday.

The SAVE plan, which reduces payments for millions of borrowers, opened for enrollment last August. But some of its benefits, like the shortened path to forgiveness, were not set to take effect until July 2024. Most other income-driven repayment plans, where payments are readjusted each year based on earnings and household size, forgive any remaining balance after a set number of years, usually 20.

SAVE cuts that term by half for people who initially borrowed $12,000 or less and reduces the repayment timeline for those who originally borrowed $21,000 or less. For every $1,000 above $12,000, a borrower can receive forgiveness after an additional year of payments. For example, if someone originally borrowed $13,000 in loans, any remaining balance would be forgiven after 11 years of payments.

The department said it was strongly encouraging those who originally borrowed $12,000 or less to apply for the SAVE program as soon as possible.

“Today’s announcement will help struggling borrowers who have been making loan payments for years, including many who never graduated from college,” said James Kvaal, the Education Department’s under secretary.

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