Joe Biden's administration will cancel student loans for an additional 206,000 people as part of a new repayment plan that offers a faster path to debt forgiveness.
The Department of Education announced the latest round of cancellations on Friday in an update on the progress of its SAVE plan. More and more people can choose to have their loans forgiven after paying for 10 years, a new limit for some loans that comes a decade earlier than in previous plans.
The two new lawsuits challenging the legality of the plan cast a shadow over the cancellations. Two groups of GOP-controlled states, led by Kansas and Missouri, recently filed federal lawsuits alleging the government overstepped its authority by creating the refund option.
“From the first day of my administration, I promised to fight to ensure that higher education is a ticket to the middle class, not a barrier to opportunity,” Biden said in a statement. “I will never stop working to cancel student debt, no matter how many times Republican elected officials try to stop us.”
With this latest action, the Department of Education has already approved the cancellation of some 360,000 loans through a new amortization plan, with a total amount of 4.8 billion dollars.
The SAVE Plan is an updated version of the federal amortization plan available for decades, but with more generous conditions.
In the 1990s, Congress created the first income-driven repayment plan for those who had difficulty meeting payments under conventional plans. It limited monthly contributions to a percentage of income and canceled any unpaid debt after 25 years. Similar plans were added later, offering cancellation after 20 years.
Claiming that borrowers need even more help today, the White House merged most of those plans into a single option with better terms.
The SAVE (Savings on a Valuable Education) Plan allows more borrowers to pay nothing until their income exceeds certain limits. It also reduces payments more than previous plans, eliminates interest growth, and pays off unpaid debt in just 10 years.
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