Joe Biden to forgive $39 billion in student loan debt. Who can get relief in California?

The Biden administration will forgive $39 billion in federal student loans, the U.S. Education Secretary said Friday, for more than 804,000 borrowers.

The announcement comes two weeks after the Supreme Court rejected a White House plan to relieve tens of thousands in student debt for some borrowers. This one-time forgiveness differs from the plan the Court quashed by correcting issues with certain repayment plans that relieve someone’s debt after about 20 or 25 years of payments.

Through “fixes” to the count of monthly payments, the administration will offer relief to some borrowers with repayment plans based on their incomes. The fix aims to ensure people who have made 240 or 300 monthly payments in accordance with Education Department policy have the remainder of their debt wiped.

Some payments that “should have moved borrowers closer to forgiveness were not accounted for,” the Education Department said in a statement.

“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Education Secretary Miguel Cardona said in the release.

Who qualifies?

Eligible federal student loan borrowers will be notified in the coming days. People affected have Direct Loans or Federal Family Education Loans covered by the Education Department, including Parent PLUS loans.

The relief will go out automatically a month after the the person has been notified. Student loan servicers will tell borrowers once the debt has been erased. People awaiting relief will not have to make loan payments.

Borrowers who want to opt out of the relief should contact their loan servicer, the Education Department said. People who opt out must continue repaying their loans once payments resume.

Federal student loan payments start again in October after being paused during the coronavirus pandemic. Interest will start to accrue again on Sept. 1.

The Education Department last year said it would rectify any inaccuracies on payments counts.

California is among the least student debt-burdened states, according to the Moody’s Analytics, given its numerous acclaimed public universities and state subsidies that help cover costs for in-state students.

The median federal student loan debt for borrowers at all four-year California colleges with more than 500 undergraduates exceeds $10,000, according to 2022 analysis by The Sacramento Bee. About 30% of Sacramento State undergraduates took a federal loan; their median debt upon graduation was around $15,000. About 31% of University of California, Davis, undergraduates borrowed federal money; they graduated with a median debt of around $13,200.

Supreme Court

The Supreme Court at the end of June tossed Biden’s plan to relieve up to $20,000 for student loan borrowers who received a Pell Grant, federal aid for low-income students. The administration aimed to forgive up to $10,000 for those who earn under $125,000 a year individually or are in households that make under $250,000 in an effort to alleviate financial distress caused by the pandemic.

The Court, along ideological lines, ruled the White House initiative exceeded its power under the law it had invoked to justify the plan.

Hours later, Biden pledged to take a new route for similar forgiveness. The administration also finalized an income-driven repayment program to halve borrowers’ monthly payments. And Biden said that there would be an “on ramp” for borrowers who miss monthly payments through September 2024. During this time, people won’t be considered delinquent and won’t face default or harm to their credit.

The Biden administration has approved more than $116.6 billion in student loan forgiveness for more than 3.4 million borrowers after today’s announcement, including for people in public service and those who attended certain for-profit colleges.

“This Administration will not stop fighting to level the playing field in higher education,” Cardona said.