As suspected following the Supreme Court’s recent ruling to block the Biden administration’s student loan forgiveness proposal, the administration has created their own loophole to do it anyway.
On Friday, the administration announced the forgiveness of $39 billion in student debt for 804,000 borrowers.
The new program is thanks to a new regulatory rulemaking process by the Department of Education, which tweaked the student loan program’s income-driven repayment plans, CNBC reports.
Under those repayment plans, borrowers get any remaining debt canceled by the government after they have made payments for 20 years or 25 years, depending on when they borrowed, and their loan and plan type.
In the past, payments that should have moved a borrower closer to being debt-free were not accounted for, according to the Biden administration.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said US Secretary of Education, Miguel Cardona.
Eligible borrowers will be notified in the coming days by the Education Department.
The tweaks which created the loophole include counting payments for borrowers who had paused their payments in various deferments and forbearances, as well as those who had made partial or late payments.
According to the Department of Education, Friday’s action addresses “historical failures” and administrative errors which miscounted qualifying payments made by borrowers. Those affected include Americans with Direct Loans or Federal Family Education Loans held by the department.
The move comes before student loan payments are set to resume in October, following a years long pandemic-era pause.
Separately, the Department of Education is also moving forward with a plan we’ve previously highlighted – the Saving on a Valuable Education (SAVE) plan.
Under the president’s SAVE scheme, borrowers with undergraduate loans would only make payments equal to 5 percent of their discretionary income instead of 10 percent, which the administration estimates would save borrowers approximately $1,000 per year. Moreover, student loan forgiveness would be provided to borrowers with balances of $12,000 or less after ten years of payments rather than the original 20 years.
This post was originally published at Zero Hedge