The Department of Education (DOE) announced Friday that it will automatically forgive $39 billion of student loan debt for more than 804,000 borrowers, following a recent ruling by the Supreme Court that blocked the administration’s plan to grant forgiveness to nearly 40 million Americans.
The DOE will start notifying borrowers Friday that their federal student loans “will be automatically discharged in the coming weeks,” according to a DOE press release. The Supreme Court ruled 6-3 in June that the Biden administration cannot use executive power to cancel up to $10,000 in student loan debt for non-Pell Grant recipients and up to $20,000 for Pell Grant recipients.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Miguel Cardona, DOE secretary, said in a statement. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers.”
In June, the DOE announced that it would circumvent the Supreme Court’s ruling through the use of the Higher Education Act and an expansion of income-driven repayment plans, which would slash payments for those making $32,800 or less annually to $0. Borrowers who missed their loan payments within the first year, beginning on Oct. 1, will not be penalized, put in default or reported to credit and collection agencies.
The DOE estimates that its plan will save student loan borrowers at least $1,000 per year. The expansion of the income-driven repayment plans are estimated to cost taxpayers more than one-time outright forgiveness would, according to a Penn Wharton Budget Model report.
“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” James Kvaal, under secretary, said in a statement. “Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”
The Supreme Court’s June decision involved two cases, Biden v. Nebraska and Department of Education v. Brown, which challenged whether the Secretary of Education had the emergency authority to cancel student loan debt.
“The Biden administration’s blatantly political attempt to circumvent the Supreme Court is shameful,” Republican North Carolina Rep. Virginia Foxx said in a Friday statement. “The Biden administration is trampling the rule of law, hurting borrowers, and abusing taxpayers to chase headlines. Biden’s student loan scam is far from over.”
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