President Joe Biden announced on Wednesday that his administration is canceling $1.2 billion dollars in student debt for some 153,000 borrowers enrolled in a new repayment plan.
The Biden administration had initially planned to start forgiveness under the Saving on a Valuable Education (SAVE) plan in July, but it is now taking effect almost six months ahead of schedule.
"This shortened time to forgiveness will particularly help community college and other borrowers with smaller loans and put many on track to being free of student debt faster than ever before," the White House said in a statement.
The relief applies to borrowers enrolled in the SAVE plan who originally took out $12,000 or less in student loans and have made at least 10 years of payments.
Those who took out more than $12,000 will be eligible for cancellation but on a longer timeline. For every $1,000 borrowed beyond $12,000, borrowers can receive forgiveness after an additional year of payments on top of 10 years.
Those who are notified that their debts have been forgiven do not need to take any further action.
The Education Department will also reach out next week directly to borrowers who would be eligible for early cancellation under the SAVE plan but are not currently enrolled, the White House said.
"With today's announcement, we are once again sending a clear message to borrowers who had low balances: if you've been paying for a decade, you've done your part, and you deserve relief," Education Secretary Miguel Cardona said in a statement.
US President Joe Biden speaks about student loan cancellation on October 4, 2023, at the White House in Washington, D.C. Borrowers who took out $12,000 or less and have made payments for 10 years will... US President Joe Biden speaks about student loan cancellation on October 4, 2023, at the White House in Washington, D.C. Borrowers who took out $12,000 or less and have made payments for 10 years will have their debt canceled. More BRENDAN SMIALOWSKI/AFP via Getty Images
The latest round of forgiveness means the administration has now approved nearly $138 billion in debt relief for almost 3.9 million borrowers through executive actions, the White House said.
Biden has vowed to find other ways to provide debt relief after his plan to cancel more than $400 billion in student debt was struck down by the Supreme Court in June last year. That plan would have canceled up to $20,000 in federal student loans for those with annual incomes below $125,000 or couples with incomes below $250,000.
The SAVE plan, which offers far more lenient terms than other income-driven repayment plans, was launched last year ahead of the end of the pandemic-era pause on student loan repayments in the fall of 2023. The new plan offers cancellation after as little as 10 years, while others offer cancellation after 20 or 25 years of payments.
The plan also lowers monthly payments for millions and prevents interest from snowballing as long as borrowers make monthly payments.
The Biden administration is also pursuing another plan for widespread debt cancellation under a different legal authority to the one the Supreme Court rejected. The plan is not finalized, but the Education Department in late October released a draft of a proposal that hopes to provide relief to certain groups of borrowers.
Update 2/21/24, 6:45 a.m. ET: This article has been updated with additional information.