50,000 borrowers to get loan forgiveness notices this week – as Education Department penalizes lender for ‘gross servicing failures’
Thousands of borrowers with older student loans will be notified this week that they are eligible for forgiveness under a Biden administration program.
About 51,000 borrowers will receive forgiveness in this latest effort, after the first batch of Americans had their debts forgiven over the summer.
The Department of Education estimates that $2.8 billion in student loans will be forgiven in this latest round, with some borrowers notified by email.
Others will have to log into their online account within their loan servicer to find the notice.
Many eligible borrowers did not have to apply for this relief, which is intended for Americans on income-driven repayment plans.
Thousands of borrowers with older student loans will be notified this week that they are eligible for forgiveness under a Biden administration program
The relief will be provided through the Income-Based Repayment (IDR) Account Adjustment.
IDR plans offer lower payments over 20 or 25 years, depending on the type of loan, and then forgive the remaining balance.
This bill adjustment bends the rules by which payments count toward IDR forgiveness.
This means that a greater number of months a person has spent on student loan repayments or breaks since leaving school will count toward forgiveness after the adjustment is applied – even if he or she has never previously enrolled in an IDR plan .
The notice will be sent to borrowers this week, said Forbes, reads: ‘Congratulations! The Biden-Harris Administration has fully forgiven your federal student loan(s) below.
“This debt relief was processed as part of the Biden-Harris Administration’s one-time bill adjustment because your student loan(s) have been repaid for at least 20 or 25 years.
‘An adjustment to your account has updated the number of payments that are eligible for Income Tested Repayment (IDR) forgiveness.’
To date, more than 850,000 borrowers have had their debts forgiven under the adjustment program, with more than $40 billion in forgiveness pending or completed.
In June, the Supreme Court canceled Biden’s student loan forgiveness program, which promised up to $20,000 in debt relief for low- and middle-income borrowers.
In the aftermath, Biden said he would pursue new measures to ease student loan burdens — and has since announced a patchwork of different programs to pay down the debt.
The Department of Education estimates that $2.8 billion in student loans will be forgiven in this latest round, with some borrowers notified by email
Federal student loan repayments resumed on October 1 after a pandemic-era pause that began in March 2020.
Borrowers faced long wait times and website outages, while experts warned scammers were taking advantage of the confusion around restarting payments.
Graduates who wanted to speak to the companies that service their loans, including Nelnet, EdFinancial and Mohela, to sort out repayment terms or find out what needed to be done reported being unable to speak to agents or log into online portals.
‘It’s a complete mess,’ Blake Morgan, a borrower in Kansas City, Missouri, who has $172,000 in federal student loans, told Bloomberg. “It’s so hard to get a hold of someone now.”
He said he spent hours on the phone with the servicer of his lending company Nelnet to report a reduction in his income that would affect the amount of his repayment.
Today, the Department of Education announced it will penalize servicer Mohela, or the Missouri Higher Education Loan Authority, for failing to send timely billing statements to 2.5 million borrowers.
As a result of the error, more than 800,000 borrowers were delinquent on their loans, the Ministry of Education said in a statement.
The department is withholding $7.2 million from the October payment to the servicer because of the error and says it will keep all borrowers affected by this issue in forbearance until the issue is resolved.
Any borrower on an income-driven repayment plan will not be charged for the months.
“The actions we have taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross defaults,” Education Secretary Miguel Cardona said.
“We are committed to fixing our country’s broken student loan system, and that includes strengthening oversight and accountability and taking every step possible to improve outcomes for borrowers.”