Approximately 2,580 federal student loan borrowers in Rhode Island are eligible for student loan debt relief under the Biden Administration’s initiative to correct past servicing errors and correct the number of payments that count towards loan forgiveness under income-driven repayment (IDR) for student loans. Rhode Islanders could receive $109 million in IDR forgiveness.
The White House estimates these administrative fixes could erase $39 billion of federal student debt for more than 800,000 borrowers nationwide.
U.S. Senator Jack Reed says Rhode Island student loan borrowers deserve targeted relief and Congress must work on a bipartisan basis to fix the underlying problem of college affordability.
“For too long, servicing errors and failure to keep accurate counts of payments have kept borrowers from receiving the debt cancellation they are entitled to under the law. The Biden Administration has taken action to correct these systemic failures, and as a result over 2,500 Rhode Islanders could see the balance of their loans forgiven, worth up to $109 million in savings,” said Senator Reed. “This isn’t free money. It is righting a wrong by federal loan servicers who failed to provide forgiveness to people who were eligible.”
According to the Biden Administration, the new program will help ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness under IDR plans.
It is part of the Biden Administration’s effort to address historical failures in the management of the federal student loan program in which qualifying payments made under IDR plans that should have moved borrowers closer to forgiveness were not accounted for. Borrowers are eligible for forgiveness if they have accumulated the equivalent of either 20 or 25 years of qualifying months.
The U.S. Department of Education also announced a new IDR plan – Saving on Valuable Education (SAVE) plan – that will base a borrower’s monthly student loan payment on the borrower’s income and family size, and could cut in half the monthly payment required for borrowers with undergraduate degrees.
The Biden Administration’s SAVE plan, which is scheduled to begin this fall and go into full effect by July of 2024, is designed to improve the old IDR system and help student loan borrowers save thousands of dollars over the life of their loans.
Borrowers must have federally held student loans to qualify for the SAVE repayment plan. These include Direct subsidized, unsubsidized and consolidated loans, as well as PLUS loans made to graduate students. The SAVE plan will replace the old Revised Pay-as-You-Earn (REPAYE) student loan system. Those who are already in the REPAYE program will be automatically switched to the SAVE program.
Private student loans do not qualify for the new SAVE repayment plan, or any other federal repayment plan.
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