1. Repayment arrangements based on income
Income-driven repayment plans are based on a portion of the borrower’s discretionary income and were first introduced in 1994. These payments are usually less than those made under normal repayment terms, and in certain cases, they are nonexistent. Any balance owed by borrowers is erased after a predetermined amount of time. There exist four distinct plans.
However, according to higher education expert Mark Kantrowitz, many debtors paid into the system for decades without receiving the promised cancelation.
In a prior CNBC interview, Kantrowitz stated, “The loan servicers weren’t keeping track of the number of qualifying payments.”
In order to determine if millions of borrowers’ loan accounts should have had their debt forgiven, the Biden administration has been reviewing those accounts. Over 930,000 individuals have profited thus far, with over $46 billion in debt elimination.
Most borrowers with federal student loans are eligible for income-driven repayment programs; visit Studentaid.gov to study your options and submit an application.
The Education Department recently declared that it would also forgive the debts of those who borrowed no more than $12,000 and have been repaying their loans for ten years or longer. Borrowers must be enrolled in the administration’s new Savings on a Valuable Education, or SAVE, scheme in order to be eligible.