Biden to forgive $39bn in US student loan debt

Announcement comes after Supreme Court blocked President's plan to wipe away $430bn in loans

Protesters demand the cancellation of student debt outside the Supreme Court in Washington. AP

President Joe Biden on Friday announced that his administration would forgive $39 billion in US student loan debt to “fix” income-driven repayment programmes.

Borrowers who have made either 20 or 25 years of monthly IDR payments will be eligible for the new programme. The White House said more than 804,000 borrowers would see their debt cancelled.

“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Education Secretary Miguel Cardona said in a statement.

Friday's announcement comes after the Supreme Court ruled against Mr Biden's plan to forgive $430 billion in US student loan debt.

Mr Biden called the high court's decision a “mistake” and pledged to find alternative routes to enact student loan forgiveness.

“Our administration will continue to fight to make sure Americans can access high-quality postsecondary education without taking on the burden of unmanageable student loan debt,” Vice President Kamala Harris said in a statement.

Income-driven repayment plans are payment options for borrowers that would lower their monthly costs.

Eligible borrowers will be notified beginning on Friday and discharges will begin 30 days afterwards. The Education Department said borrowers will be notified every two months until next year.

Americans owe more than $1.7 trillion in total student loan debt, according to the Federal Reserve.

Most borrowers who save money from potential student loan forgiveness would use those funds to pay off other debts, the Fed said in a recent report on the economic well-being of US households.