The White House recently announced that approximately 813,000 borrowers whose accounts were adjusted in August 2023 will receive an email from President Biden that their loans are being forgiven. This is based on the U.S. Department of Education (ED) undertaking a one-time account adjustment to evaluate which borrowers meet the qualifying threshold on their repayment plan. 

By way of background, the income-driven repayment plans for federal student loan borrowers capped monthly payments at a given percentage of earnings, with the promise the balance would be forgiven after 20 or 25 years of payments. However, a 2022 Government Accountability Office report found the Department did not accurately track payments until a decade after the first income-driven plan was implemented. State and federal authorities also accused student loan servicers of steering borrowers into long-term forbearances, a less time-consuming option, but one that did not count toward loan forgiveness. As a result, very few borrowers received forgiveness through the programs. In April 2022, the Biden administration announced any month in which borrowers were in repayment status would count toward forgiveness — even if they were not enrolled in an income-driven plan. ED estimated relaxing the rules would give 3.6 million people at least three years of additional credit. This adjustment would help more than 800,000 people hit the payment benchmark needed to receive loan forgiveness. 

In July 2023, ED announced borrowers who had made the required 20 or 25 years of qualifying payments on income-driven repayment plans would be notified of their debt cancellation and 30 days later their debt servicers would begin discharging their loans. ED was expected to review borrowers’ accounts every two months. However, in August 2023, the New Civil Liberties Alliance, a nonprofit aimed at protecting constitutional freedoms, filed a lawsuit on behalf of the Cato Institute and the Mackinac Center for Public Policy to block relief for borrowers who made necessary payments on income-driven repayment plans. The groups argued that because they are nonprofits, the relief would undermine their recruiting efforts through the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after 10 years of qualifying payments. They also argued that Congress, which created income-driven repayment plans in the 1990s, never gave ED authority to give credit for nonpayment. In an 18-page order dismissing the case, U.S. District Judge Thomas L. Ludington of the Eastern District of Michigan disagreed, concluding the groups lacked the standing to stop the efforts to alleviate the burden of student debt. The decision was issued the same day ED began discharging $39 billion in federal student loans held by more than 804,000 borrowers who have been in repayment for more than 20 years. The timing of both the lawsuit and decision was important as federal student loan payments were set to resume in October 2023 after a multi-year pause.

Over the past few months, a growing number of borrowers have been receiving debt relief through the ED adjustments to borrowers' accounts. In October 2023, approximately 125,000 more borrowers got $9 billion in debt wiped out through not only income-driven repayment adjustments, but also relief through Public Service Loan Forgiveness. The relief came at a time when borrowers were reportedly experiencing challenges since payments resumed, including inaccurate billing and communication issues with their servicers, due to the unprecedented transition back into repayment. ED has also said it will hold servicers accountable as borrowers make their payments. Recently, it withheld October pay from the servicer MOHELA over its reported failure to send billing statements to millions of borrowers on time. 

ED is also in the process of crafting its new plan for student-loan forgiveness after the U.S. Supreme Court struck down the first attempt at broad relief by President Biden in June 2023. Specifically, the U.S. Supreme Court ruled that President Biden did not have the authority to broadly cancel student loan debt using the HEROS Act of 2003, which allows the Education Secretary to waive or modify student-loan balances in connection with a national emergency, like COVID-19. In turn, at the end of October 2023, ED released the draft text of its proposal to cancel student debt for federal borrowers using the Higher Education Act of 1965. The Higher Education Act does not depend on a national emergency, but does require the administration go through negotiated rulemaking, which involves a series of negotiation sessions with higher education stakeholders and borrowers to craft a final regulation for the new debt relief plan. 

The current draft regulatory text identifies five groups of borrowers that ED is seeking to prioritize for debt relief: (1) those who have outstanding balances that exceed what they originally borrowed, (2) those who have loans that entered repayment 25 or more years ago, (3) those who took out loans to attend programs that left them with too much debt compared to post-grad earnings, along with those who went to schools with "unacceptably high" default rates, (4) those who are eligible for forgiveness under repayment plans like income-driven repayment and Public Service Loan Forgiveness but have not yet applied for relief, and (5) those who are experiencing financial hardship "in ways that the current student loan system does not adequately address." The amount of student debt cancelled could vary by each group. ED was scheduled to meet with a group of negotiators for final negotiations sessions on December 11 and 12 to refine language for the final rule. Despite these efforts, more relief may not be immediately on the horizon. According to ED negotiator Tamy Abernathy, this new relief will not reach every student-loan borrower. "We are not looking at a broad-based debt cancellation where we are going to wipe off debt in its entirety," she said. She also said unless the ED Secretary decides to implement the relief early, it would not go into effect until July 1, 2025, meaning it could get tangled up in the presidential election.