Student Loans

Biden Forgives Almost $40 Billion in Student Loans

The spate of forgiveness reconciles administrative errors when carrying out changes to income-driven repayment plans.


The Biden administration has announced that it will forgive almost $40 billion in federal student loans for over 800,000 total borrowers enrolled in one of several income-driven repayment plans.

The spate of loan forgiveness is the culmination of several changes to income-driven repayment (IDR) plans made in April 2022—and the correction of endemic government errors in carrying out those changes. Under most IDR plans, borrowers pay a specific percentage of their income each month for a set number of years—usually 20 or 25 years—after which their remaining balance will be forgiven. Previously, payments were required to be on time and in full in order to count toward cancellation. 

However, under the April 2022 changes, borrowers with certain federal loans could have payments counted toward their 20- or 25-year time span, even if those payments were incomplete or late.

Among other circumstances, the new regulations also allow any month "spent in economic hardship or military deferments" after 2013 or any month spent in noneducational deferments before 2013 to count toward total repayment time.

These changes were the first of a wide range of alterations to IDR plans. Most notably, the Biden administration announced in August that it would relax the terms of the most common IDR, dramatically reducing monthly payments and halving the number of payments required for forgiveness for many borrowers.

According to the Education Department, this latest round of loan cancellation reconciles administrative errors made when adjusting for the April 2022 changes that led officials to inaccurately record changes to the number of months remaining before forgiveness for thousands of borrowers was granted, meaning that borrowers who were eligible for forgiveness under their IDR plan didn't have their loans discharged. 

"At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That's unacceptable," Under Secretary James Kvaal said in a Friday press release. "Today we are holding up the bargain we offered borrowers who have completed decades of repayment." 

The Education Department's latest round of forgiveness shows just how many taxpayer dollars can be spent without engaging in blanket federal student loan cancellation. Though Biden's plan for sweeping loan forgiveness was struck down at the Supreme Court, the Education Department is still free to spend billions of taxpayer dollars by making dramatic changes to existing loan repayment programs. 

Even if Biden never achieves his goal of enacting blanket loan cancellation, his reshaping of IDR plans may well do more long-term damage than one-time forgiveness ever could. Changes to IDR plans are projected to cost as much as $360 billion in just the next decade, while Biden's one-time loan forgiveness plan was estimated to cost over $400 billion total.