Nearly 9,500 Mississippians to receive $451 million in student loan forgiveness

by

Will Stribling

• Published on July 21, 2023 • Comments

New graduates line up before the start of a community college commencement in East Rutherford, N.J., May 17, 2018. This summer, millions of Americans with student loans will be able to apply for a new repayment plan that offers some of the most lenient terms ever. Interest won’t pile up as long as borrowers make regular payments. Millions of people will have payments of $0. And starting in 2024, undergraduate loan payments will be reduced by half.
(AP Photo/Seth Wenig, File)

News

Nearly 9,500 Mississippians will see their student loans automatically discharged in the coming weeks.

Will Stribling

Nearly 9,500 Mississippians to receive $451 million in student loan forgiveness

Income-driven repayment plans, established by the U.S. Department of Education in the 1990's, set a borrower’s monthly payment to a percentage of their discretionary income for a period of 20-25 years. After that, the remaining balance is supposed to be discharged. However, in recent years as people began hitting that multi-decade threshold, that wasn't happening.

"There were some pretty significant gaps in how the Department of Education and servicers were collecting data related to IDR payments, which kind of created a hole for folks to slip through," Brian Denton, officer of The Pew Charitable Trusts' student loan initiative. And that in some cases was leading to folks not getting the forgiveness that they really deserved after making years of payments."

Now those issues have been fixed and almost $451 million in student loans held by Mississippians are set to be discharged.

The Education Department is also creating a new income-driven repayment plan, called the SAVE Plan, that will cut many borrowers' monthly payments in half, and most importantly, prevent interest from accruing as long as borrowers stay up-to-date on their payments.

Denton thinks this new plan will lead to more borrowers engaging with the repayment system because PEW'S research shows that interest accrual leads people to disengage from the repayment process entirely.

"When people were oftentimes struggling to make student loan payments, but still seeing their balances increase month over month, it really kind of created this effect of discouraging them, I think, to stay engaged with the repayment system with their servicer," Denton said. "For some folks, it felt like, why even bother if I'm not seeing any progress towards pay off."

A pandemic-era pause on student loan payments is set to end in October.