A $6 billion loan debt forgiveness agreement between the government and a group of student borrowers was given a tentative green light by a federal judge. In 2019, seven plaintiffs brought a class action lawsuit against Betsy DeVos, who was then the secretary of education. They claimed that because the Department of Education refused to handle borrower defense claims, more than 160,000 students’ credit was ruined, which negatively impacted their ability to build wealth in the future.
After more than a year of discussions, senior U.S. District Judge William Alsup granted the proposed settlement his preliminary approval on Thursday from the bench. But before the arrangement is completely accepted, the federal government and the class of borrowers who are fighting for debt relief still have a final hearing.
POLITICO was the first to report that the Education Department has set up mechanisms and processes to undertake a comprehensive student loan forgiveness plan as soon as Biden gets the go-ahead. This includes a backup plan in the event that Biden imposes income criteria on who is eligible for student loan forgiveness, which officials have said could be a component of any such proposal. Here are some crucial components:
Some borrowers may be eligible for automatic student debt forgiveness, possibly months after any announcement, if their income information is already on file with the Education Department.
Borrowers without income information on file with the Department may be able to swiftly self-certify their income on a straightforward application form, with the Department conducting a limited number of audits to verify it.
If Biden approves such extensive relief, the Education Department is poised to implement federal student loan forgiveness for almost any type of federal loan, including Graduate PLUS loans, privately owned FFEL loans, and Parent PLUS loans. It’s not certain if consolidating your Direct loans could make you eligible.