$39 billion in federal student loans forgiven for more than 800,000 borrowers, what this means

HOUSTON - The U.S. Department of Education (DOE) announced $39 billion in federal student loans will be forgiven for 800,000 borrowers.

After years of borrowers not getting credit for all of their payments toward loan federal student loan forgiveness programs, the DOE has been doing a recount.

It now says 804,000 borrowers who have made the required 240 or 300 monthly payments, which is equivalent to 20 or 25 years, on an Income Drive Repayment Plan or Standard Repayment Plan will be notified that the balance of their loans will be forgiven.

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And after the U.S. Supreme Court blocked President Biden's plan to forgive borrowers up to $20,000 in federal loans last month, he announced the Saving on A Valuable Education Plan, or SAVE Plan.  

The SAVE Plan is an Income-Driven Repayment Plan that will reduce monthly payments based on the borrower's income and family size, replacing the Revised Pay As You Go Plan.

D.O.E. says most borrowers will save at least $1000 a year.

Borrowers earning less than $32,800 a year, or a family of four earning less than 67,500 a year, would not have to make payments under the SAVE Plan.  

Interest will not accrue and drive up what borrowers owe.

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On a $10,000 loan, under the old plan, borrowers would pay back $10,956.  Under the SAVE Plan, they could pay back $6,121.  

For borrowers who are not able to make payments when they resume Oct. 1, President Biden is also starting an "on-ramp" to repayment program for a year, when missed payments won't be considered delinquent or reported to credit bureaus or collection agencies.