Education Department Cancels Loans for Thousands of Borrowers

The administration also said it's canceling loans for 65,000 borrowers who are enrolled in older income-driven repayment plans and hit the finish line for forgiveness and another 5,000 borrowers through the Public Service Loan Forgiveness programThe Education Department announced the latest round of cancellations Friday in an update on the progress of its SAVE Plan.

Congress created the first income-driven repayment option in the 1990s for people struggling to afford payments on standard plans. It capped monthly payments to a percentage of their incomes and canceled any unpaid debt after 25 years. Similar plans were added later, offering cancellation in as little as 20 years.

Almost 8 million Americans have enrolled in the plan, including 4.5 million who pay nothing because they have lower incomes. The Biden administration says it's designed to help those who need it most. Counterintuitively, those with smaller student loan balances tend to struggle more. It’s driven by millions of Americans who take out student loans but don’t finish degrees, leaving them with the downside of debt without the upside of a higher income.

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