More than 37,000 Ohioans will have student debt canceled this summer
COLUMBUS, Ohio (WCMH) – More than 37,000 Ohioans will have their remaining student loan balances wiped clean, correcting years of mismanaged loan payment programs.
The U.S. Department of Education announced Tuesday that 37,070 Ohioans on income-driven repayment programs – whose loans total $1.74 billion – will have their student loans canceled in the coming weeks. Thousands of Ohioans whose balances should have been cleared years ago will automatically have their loans discharged.
Borrowers on income-driven repayment plans, which adjust monthly payments based on income, have their loan balances forgiven after 240 or 300 months of payment, depending on the plan.
Yet a Federal Student Aid review revealed that loan services did not accurately tally monthly payments, if at all. Other borrowers who should have been steered toward income-driven repayment plans were instead pushed to forbearance – which pauses student loan payments but allows interest to accrue.
Many of those borrowers remained on forbearance for years, increasing the risk of default on loans whose interest grew unmanageable.
A 2021 report by the National Consumer Law Center found that of the 2 million borrowers who have paid off loans for 20 or more years, only 32 had their balances wiped.
When announcing the pending cancellations last April, President Joe Biden vowed to address “historical failures in the administration of the federal student loan programs.”
About 40,000 borrowers enrolled in the Public Service Loan Forgiveness program immediately had their debt canceled, while 3.6 million borrowers were given one-time adjustments to monthly payment counts to go toward income-driven repayment forgiveness, regardless of payment plan.
How do I get my debt canceled?
The Federal Student Aid office began emailing qualified borrowers on July 14. Upon receipt of the email, borrowers can expect remaining balances to be discharged within 30 days.
Borrowers don’t have to opt into forgiveness nor apply for loan discharges. Those who wish to opt out of forgiveness, however, can do so after their debt is canceled by contacting their loan servicer.
Over the next year, the Department of Education will continue notifying borrowers who surpass the 240- or 300-month threshold every two months. In a year, all borrowers’ monthly payment tallies will be updated.
Ohio ranks sixth for most loan borrowers and most loan balances canceled under the income-driven repayment forgiveness. Texas ranks first in both, with nearly 64,000 borrowers having more than $3 billion in debt discharged.
What if I don’t qualify?
A few weeks after the U.S. Supreme Court struck down Biden’s sweeping, one-time student loan forgiveness program, Biden announced both his intention to develop both a new forgiveness program and a new income-driven repayment program.
The Saving on a Valuable Education (SAVE) plan will replace the Revised Pay As You Earn (REPAYE) plan to significantly reduce monthly payments for lower-income borrowers.
Under the plan, which will launch in the coming weeks, a borrower’s monthly payment is based on an updated discretionary income, measured by the difference between a person’s adjusted gross income and 225% of the Federal Poverty Line. Other plans measure discretionary income compared to 100% or 150% of the poverty line.
Single borrowers earning $32,800 or less will owe nothing on their loans. All borrowers’ remaining interest is eliminated for each month of payment. Like other income-driven plans, SAVE plan enrollees will have their debt canceled after a certain amount of monthly payments.
Borrowers enrolled in the REPAYE plan will automatically switch to the SAVE plan upon launch, while other borrowers must wait until applications open.
Regardless, student loan payments will resume at the end of August.