You could have your student loan debt wiped out as soon as next month, if you borrowed less than $12,000 in federal student loans and have been in repayment for at least 10 years.
The Department of Education will begin canceling student loan debt for some borrowers enrolled in the Biden administration’s Saving on a Valuable Education (aka SAVE) plan starting in February, almost four years after then-presidential candidate Joe Biden proposed a plan for broad student loan forgiveness. SAVE is the newest of four income-driven repayment plans available to federal student loan borrowers.
The implementation of the plan to forgive smaller borrowers comes six months ahead of schedule, Biden said in a statement Friday morning, adding “this action will particularly help community college borrowers, low-income borrowers and those struggling to repay their loans.”
The Education Department paused student loan repayments and interest through the pandemic and restarted payments in fall 2023. The administration’s plan to forgive up to $20,000 in federal student loans for all borrowers was knocked down by a Supreme Court ruling last summer. Total student loan debt at the end of 2023 stood at $1.6 trillion, according to the Federal Reserve Bank of New York, second in household debt behind home mortgages at $12.14 trillion.
Here’s what we know about the new plan to cancel federal student loan debt and who qualifies. For more on your money, here’s when you can file your tax return this year and how you can file your federal tax return for free. And here are our picks for the best tax software for 2024.
What is the Education Department’s new plan to cancel student loan debt?
The Department of Education will forgive loans for borrowers who are enrolled in the department’s SAVE plan and originally took out $12,000 or less for undergraduate or postgraduate studies and have been paying off the loan for at least 10 years, according to a press release.
Those with larger loans can qualify over a longer time period: For every additional $1,000 borrowed above $12,000, borrowers must make an additional year of payments before their loans are canceled. Forgiveness will be based on the amount originally borrowed and not on the amount currently owed.
The Education Department had originally set a July deadline to roll out its student debt relief plan.
If I qualify, when will my student loan debt be canceled?
Those who qualify will have their debts canceled immediately starting in February, the administration said, and they will not have to take any action to get loans canceled.
The administration said 6.9 million borrowers are currently enrolled in SAVE, and it will reach out to more borrowers who may qualify for student debt relief.
What is the SAVE income-driven repayment plan?
For those enrolled in the SAVE plan, monthly payments are calculated based on income and family size instead of on the balance of the student loan. For example, single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,500 have a $0 payment. Monthly payments are capped at 10% percentage of a borrower’s discretionary income.
For more, here are the important dates to know for tax season 2024 and how to set up an IRS account.