The Biden administration will wipe away around $1 billion in student loan debt for borrowers who said they got ripped off by their schools.
Officials say the move helps around 72,000 Americans whose complaints may have resulted in only partial relief from the previous administration.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Education Secretary Miguel Cardona says in a news release. “A close review of these claims and the associated evidence showed these borrowers have been harmed, and we will grant them a fresh start from their debt.”
Who’s eligible for the forgiveness?
You qualify for the relief if you filed a claim against your school, your claim was approved, but you received less than a compete loan cancellation. You may also be eligible for reimbursement of the money you’ve already repaid on your student loans.
In addition, you can request that credit bureaus remove any negative marks related to your student loan debt. If you stopped making your payments, you probably did serious harm to your credit score.
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The law provides for ‘borrower defense’ debt cancellation
Provisions in federal law allow borrowers with federal student loans to ask that the debt be forgiven if their schools did anything deceptive or illegal — or abruptly went out of business.
You have to demonstrate that your college violated state law involving your loan or the education services the school provided.
Students who brought these “borrower defense” claims routinely got the cold shoulder from Trump administration Education Secretary Betsy DeVos, who tightened the rules on student loan cancellations she described as “free money”, and said was costly for taxpayers.
Relief is coming soon
But the Department of Education under President Joe Biden now says it will ensure that borrowers with approved claims will have a streamlined path to receive full loan discharges.
If you’re eligible, you’ll receive a notice over the next several weeks — followed by forgiveness of your loans.
This move by the administration is not to be confused with the very broad student loan forgiveness that’s being talked about in Washington. Biden has indicated he’s willing to cancel $10,000 in federal student loan for every borrower, but many congressional Democrats are urging him to go to $50,000.
What if your student debt isn’t being canceled — and you need help now?
If you’re not eligible for the government’s discharge plan and you need relief from overwhelming student loan debt, there are a few things you can do.
At the top of the list is refinancing your student loans. Student loan interest rates have hit record lows, so replacing your debt with a new private student loan at a much lower rate could cut your monthly payments substantially.
Or, here are a few ways to save money elsewhere, so you can get a better handle on your student loan burden:
Find cheaper car insurance. Many of us are now working from home and driving less, and some car insurance companies have been giving their customers price breaks. If yours won’t budge, it’s time to shop for new coverage that could save you hundreds of dollars a year.
Get a side hustle. Turn your skills and talents into a side income by using a marketplace that will match the services you can provide with customers who are more than eager to pay for them.
Take small steps that that can add up to big savings. When you go to the supermarket, use an app that gives you cash back just for snapping a photo of your receipt. And, before you do any more shopping online, download a free browser add-on that will automatically search for better prices or coupons.