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The Biden administration has fast-tracked a student loan forgiveness program that could erase the debt of thousands of Texas borrowers with smaller loans.
Texans who took out $12,000 or less in loans and have been repaying for at least 10 years will have their debt automatically canceled in February, as long as they are enrolled in a federal income-based repayment plan known as SAVE. It will bring significant relief to community college borrowers in particular, who typically borrow in smaller amounts.
More than 590,000 Texans are enrolled in the SAVE plan. The U.S. Department of Education did not immediately say how many of those program enrollees had debts of $12,000 or under.
The Biden administration is encouraging borrowers who are eligible for early debt cancellation to sign up for the plan at studentaid.gov.
“Today’s announcement will help struggling borrowers who have been making loan payments for years, including many who never graduated from college,” said Under Secretary of Education James Kvaal in a news release Thursday. “Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind.”
For every $1,000 of debt over $12,000, a borrower is eligible for forgiveness after one more year of repayments. The debt relief benefit is based on how much a borrower first took out to attend college, not how much they currently owe.
The Biden administration created the SAVE plan last year, touting it as the most affordable federal loan repayment plan in history. Unlike previous plans, interest on SAVE repayment plans cannot grow to uncontrollable levels. Borrowers who make payments in full and on time will have their unpaid monthly interest canceled. The Education Department has estimated that the plan will make 85% of future community college borrowers debt-free within 10 years.
Borrowers who have defaulted will also benefit from the forgiveness program; more than three in five borrowers with defaulted loans originally borrowed less than $12,000, Kvaal said.<br>
The Texas Tribune partners with Open Campus on higher education coverage.
