Nearly one million people have received a surprise of financial relief for their student loans.
USA Today reports that around 804,000 people have had their outstanding student loan balances cleared. The forgiveness came after the U.S. Department of Education discovered that it had miscalculated the number of loan payments the group of borrowers had made for over 20 to 25 years. The payments were being deducted from the borrowers’ income, but when they hit the threshold to be forgiven, their debt had not been cleared due to the miscalculation.
Among the group of borrowers is Katrina Mosler, who had a debt of $27,000 prior to having her loans forgiven. According to the outlet, the California resident had initially attended Humboldt State University in 1995 and took out student loans. However, she went on to drop out of school and put her loans in forbearance, which caused accrued interest. Her lack of financial literacy caused her loans to go from “a manageable amount” to sky-high.
“When you drop out, there’s no guidance,” Mosler told the outlet. “I was 20 and struggling and just pretty aimless.”
Similar to others who had signed up for income-driven repayment, when Mosler would make student loan payments they didn’t reflect on the principal balance.
“You look at your bill. Your payment is for $113, and $8 of that goes to the principal. The rest goes to interest. It just feels really defeating,” she said.
Following the announcement of the student loan forgiveness, the borrowers are set to retire, support their children, and more.
While the group has been celebrating, the Cato Institute and Mackinac Center for Public Policy sued the administration because the announcement “lacked the authority to forgive the outstanding debt,” per the outlet. However, the lawsuit was dismissed.
As previously reported by AFROTECH, President Joe Biden has been adamant about his student loan forgiveness program across the U.S. According to Forbes, borrowers are having their loans forgiven through the IDR Account Adjustment. The Department of Education is set to process the IDR Account Adjustment by the end of 2023.