The Biden administration withdrew two major student loan forgiveness plans Friday, just weeks before President-elect Donald Trump returns to the White House. Here's a look at what it means for borrowers and student loan service providers.
The Details: The Education Department posted notices in the Federal Register that it was withdrawing two proposals that could have reduced student loan debt for millions of borrowers, including those with financial hardship and those who have been in repayment for years, CNBC reported.
The department wrote that it was withdrawing the proposed rules due to "operational challenges in implementing the proposals." It also said it would focus its resources on "helping at-risk borrowers return to repayment successfully" as the administration prepares to leave office in the next month.
"The Biden administration knew that the proposals for broad student loan forgiveness would have been thwarted by the Trump administration," higher education expert Mark Kantrowitz told CNBC.
What Else: Also on Friday, the Department of Education announced another $4.28 billion in loan forgiveness for nearly 55,000 public service workers which brought the total amount of student loan forgiveness under the Biden administration to $180 billion.
Education Secretary Miguel Cardona emphasized the administration's commitment to student loan relief for public service workers in a statement Friday.
"Four years ago, the Biden-Harris Administration made a pledge to America's teachers, service members, nurses, first responders, and other public servants that we would fix the broken Public Service Loan Forgiveness Program, and I'm proud to say that we delivered," Cardona said.
Loan Servicers: The administration's withdrawal of the additional loan forgiveness proposals is potentially a positive development for student loan providers including SoFi Technologies, Inc. (NASDAQ:SOFI), Navient Corp. (NASDAQ:NAVI) and SLM Corp. (NASDAQ:SLM)
Student loan providers would have lost revenue if Biden's student loan forgiveness plans had gone through.
Additionally, the rollout of forgiveness programs often requires servicers to update systems, retrain staff and manage complex transitions, all of which would increase expenses.
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