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A new type of student-loan forgiveness is coming this month

Ayelet Sheffey   

A new type of student-loan forgiveness is coming this month
  • Student-debt relief through a reform to the SAVE plan is coming in February.
  • Those who originally borrowed $12,000 or less and made at least 10 years of payments could see relief.

More student-loan borrowers can expect debt relief starting this month through a new repayment reform.

In early January, the Education Department announced that borrowers enrolled in the SAVE income-driven repayment plan who originally borrowed $12,000 or less would begin to see their loans forgiven in February if they made at least 10 years of qualifying payments.

The department is rolling out this relief early — when SAVE was announced over the summer, that provision of the plan wasn't set to be implemented until summer 2024.

"Giving borrowers with smaller loans a faster path to being debt-free will help many borrowers avoid financial distress and have peace of mind," James Kvaal, the undersecretary of education, said at the time.

It's unclear how many borrowers will immediately qualify for relief or when those notices will start being sent out this month. Additionally, borrowers who are not enrolled in the SAVE plan will need to enroll at to qualify for this benefit.

While any borrower can apply for SAVE, the monthly estimated payments will differ — a single borrower making under $32,800 or a family of four making under $67,500 would receive $0 payments under the plan. For other borrowers, SAVE will calculate the most affordable payment based on income.

The Education Department said that borrowers who originally borrowed over $12,000 could still see quicker relief — for every $1,000 above the $12,000 threshold, the borrower is set to get relief after an additional year of payments.

The department said it would continue evaluating borrowers' accounts on "a regular basis" to identify those who qualify for relief through this SAVE provision.

Other forms of ongoing relief

The new SAVE provision is just one of the Education Department's relief efforts for targeted groups of borrowers. Over the past year, the department has been implementing account adjustments for borrowers on income-driven repayment plans and in the Public Service Loan Forgiveness program who have made their qualifying payments but have yet to see relief.

Most recently, in January, the department announced 74,000 additional borrowers were getting $5 billion in debt relief — of which 44,000 were public servants, and 30,000 of them were in repayment for at least 20 years but still waiting for loan forgiveness.

Biden touted the account adjustments during a campaign speech in South Carolina last month, saying: "I found another way to help more than 3.7 million people — teachers, nurses, police officers, firefighters — with $130 billion in relief and causing the economy to grow faster as a consequence of that."

Along with the adjustments, the department is working through a new process to get broader relief to borrowers after the Supreme Court struck down Biden's first attempt. Using the Higher Education Act of 1965, the department has held three negotiation sessions with stakeholders to help craft this second attempt at relief.

On Thursday, it announced it would be holding a fourth session — following pressure from some advocates, Democratic lawmakers, and even some of the negotiators themselves — to discuss relief for borrowers experiencing hardship. At the end of the third session, the department proposed five categories of borrowers to be included in the relief, but a hardship category was left out.

"We look forward to discussing another avenue for borrower relief related to hardship at our next negotiation session," Kvaal said.

It's unclear when exactly borrowers can expect this broader form of relief. Following the fourth negotiation session on February 22 and 23, the department plans to publish the proposed text of the rule to the Public Register to allow an opportunity for public comment. According to the Higher Education Act guidelines, the rule would not go into effect until 2025 unless the education secretary opted for early implementation.

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