(Reuters) -The U.S. Department of Education has canceled student loan debt for 40,000 people and offered credits to help another 3.6 million pay off their loans under a plan announced on Tuesday designed to aid low-income borrowers and public servants.
“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” Education Secretary Miguel Cardona said in the statement.
The measures add to other steps taken by the administration of President Joe Biden, including a pause on nearly all student loan collection, but they stop short of demands from the progressive wing of the Democratic Party for comprehensive student loan forgiveness.
In his 2020 presidential campaign, Biden called for canceling $10,000 in student loan debt for each borrower, a commitment of more than $400 billion. Since he was elected, the White House has said Congress must take action for wider student loan relief.
The government said it was addressing “historical failures” to communicate to borrowers all the benefits they were eligible for in federal student loan programs.
At least 40,000 borrowers will receive immediate debt cancellation under the Public Service Loan Forgiveness (PSLF) Program.
Several thousand borrowers with older loans will also receive forgiveness through income-driven repayment (IDR) forgiveness, plus another 3.6 million borrowers will receive at least three years of additional credit toward IDR forgiveness, the Education Department said in a statement.
Those programs cap the amount lower-income borrowers are required to pay and forgive the remaining balance after a set number of years.
Student loan debt is seen as a drag on the economy, burdening young professionals for years after graduation, while the wide availability of loans has contributed to rising tuition.
Some 43.4 million borrowers are carrying about $1.6 trillion in outstanding student loans from the Federal Loan Portfolio, an average of more than $37,000 each, according to the Education Data Initiative.
The Biden administration canceled more than $17 billion in debt for 725,000 borrowers in its first year in office while also extending a pause on loan repayment that has provided at least temporary relief for 41 million borrowers, the Education Department said.
Source: Economy - investing.com
