Thousands of student loan borrowers could soon have their debt erased by the Biden Administration — if they initially borrowed less than $12,000. That was the announcement earlier this month from the U.S. Department of Education.
“Borrowers who have borrowed relatively small loans — less than $12,000 — and have been making all the payments required of them for 10 years, will see those loans forgiven,” said U.S. Under Secretary of Education James Kvaal.
If you’re one of these borrowers — and you’ve been making those payments — federal officials say your debt will be forgiven beginning in February … as long as you enroll in the Biden Administration’s new income-based repayment program known as the SAVE Plan.
READ MORE: Education Dept. fast-tracks forgiveness for borrowers with smaller student loans
The initiative is targeted at students who took out smaller loans — and who statistically face the biggest barriers to repaying their debts.
That may sound counterintuitive. But surveys show it’s those students are much more likely to default because many of them didn’t actually graduate with a degree — saddling them with debt without granting them the premium of higher wages that generally follows a college education.
WLRN’s Kate Payne spoke with Kvaal to learn more about this program for borrowers who took out smaller student loans. The interview has been edited for length and clarity.
WLRN: According to the Department, many of those low-end borrowers … they’re low-income, initially went to community college — which is a very common pathway for many of our students here in South Florida. And we know that many of these borrowers didn't actually graduate with a degree. Why is it important to target them for relief?
KWAAL: $12,000 is an amount that many students borrow for two years of college. So you're talking about a group that often didn't complete college or maybe went to community college. And perhaps surprisingly, this is the group that struggles the most with their student loans.
We see very high default rates among people with small loans. And it didn't seem fair to us to ask a student who went to college for only a couple of semesters to have student loans hanging over their heads for 20 or 25 years, like we do people who went to graduate or professional programs.
Stepping back a bit, there's been a lot of upheaval — chaos even — in the student loan repayment landscape recently. Millions of Americans were told that their debt would be forgiven. And then the U.S. Supreme Court struck that down. Why should borrowers believe that this program, this effort will work as promised?
Yeah it's been a challenging year for sure. With the summer we had Congress legislate that payments would restart in October. And we also had the Supreme Court strike down President Biden’s plan to forgive up to $20,000 in student debt. And that was a key part of making this easier for people.
That said, this new repayment plan is an authority we've exercised a number of times in the past. We do have the ability to define the terms of new repayment plans. And we feel quite confident in our ability to deliver this benefit for students.
We have about 475,000 borrowers in Florida who are already enrolled in the SAVE Plan, and either excused to making payments at all or saving hundreds of dollars a month. $1,400 a year on average.
Millions of Americans are trusting in these programs. They're making very critical decisions based on the amount of student loan debt that they're carrying around. For those who are struggling to wade through the bureaucracy of these programs, what is your message to them to stick it through and to get the most that they can out of these new initiatives?
Yeah, we're working really hard to help as many people as possible and fix this broken system. And, you know, we still see a lot of benefits that come with a federal student loan that people are not taking advantage of.
So I would encourage people to come to studentaid.gov. Take a look at the loan forgiveness programs we offer, public service and others. And if you think you may be eligible, please apply. And take a look at the repayment plans we have to offer as well. Because for most people, especially people with higher debts and lower incomes, you know, you're gonna find significant savings under the new SAVE Plan.
