Education Dept. Cancels $39 Billion in Student Debt for 800,000 Borrowers

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More than 800,000 borrowers will have $39 billion in federal student loan debt eliminated under a government effort to remedy years of mistakes by the loan servicers that collect payments on the government’s behalf. Millions more people will have their loans adjusted as part of the program. That process will continue into next year. The relief will go to those who have federal loans owned directly by the Education Department and who enrolled in income-driven repayment plans or would have qualified for loan forgiveness if they had done so. Those plans cap the payments that borrowers owe to a percentage of their income. Under those plans, borrowers must make payments for a term that is typically 20 or 25 years. At the end of that period, any remaining balance is forgiven. More than eight million people use income-driven repayment plans, but for decades, many of the companies that bill borrowers made extensive mistakes in tracking payments and in guiding borrowers through the payment process. Those errors put millions of borrowers further behind by years in their quest to pay off their loans.