Second Round of Student Loan Debt Cancellation

October 20, 2023

President Biden’s Second Round of Student Loan Debt Cancellation

Three days after the federal government resumed the federal student loan payment program which was first created to provide financial relief from the Covid-19 Pandemic, the Biden administration has approved debt relief for an additional 125,000 student loan borrowers, totaling $9 billion in forgiveness.

Through existing debt relief programs, three new qualifications of borrowers are having their debt canceled. These include:

  • 53,000 borrowers will receive debt cancellation under the Public Service Loan Forgiveness program, which wipes away remaining student loan debt after qualifying public sector workers make 10 years’ worth of monthly payments.
  • 51,000 borrowers who have been in repayment for at least 20 years, are getting relief thanks to a recount of their past payments. The administration has found that these borrowers already qualified for student loan forgiveness but were missing out because of past administrative errors.
  • 21,000 borrowers who have a total or permanent disability have now been approved for an automatic debt discharge through a data match with the Social Security Administration.

By using this link, you can access forms and additional information about qualifying for Loan Forgiveness, Cancellation and or Discharge.

With this additional round of loan forgiveness and cancellation, the total amount of debt that has been wiped out since the start of the pandemic totals over $125 billion along with the hundreds of billions of dollars that was saved by borrowers during the 3-year loan repayment pause.

After another $9 billion dollars in relief, economists and experts believe that the continued increase in student loan forgiveness can carry large amounts of various financial implications, including:

  • An impact on the national debt over time. By removing a source of future government revenue, this action could contribute to an increase in the national deficit, which impacts the national debt.
  • The relief's impact on inflation is another point of debate. Some argue that it wouldn't significantly affect inflation because borrowers haven't been making loan payments for three years. Conversely, others believe it could impact inflation by reducing the amount of household income used for debt repayment, subsequently increasing household wealth and spending.
  • Regarding college tuition, studies have cited the Bennett Hypothesis, suggesting that for-profit colleges may respond to debt relief by raising tuition, as students may be encouraged to borrow more.

Looking forward to possible future similar loan forgiveness, the Education Department is making another attempt at mass relief. Rule-making hearings at the department begin next week with a committee of stakeholders including borrowers and loan-servicing companies. Along with that attempt, the Biden Administration is continuing to fight in court to pass Biden’s Student-Loan Forgiveness Plan which would cancel as much as $20,000 in student debt for any borrower who earns less than $125,000 a year.