Hold Off On Refinancing
Even though interest rates are low at the moment, Kantrowitz said borrowers should think twice about refinancing their debt with a private lender.
“Student loan forgiveness, if it happens, will likely be limited to just federal loans,” he said.
You don’t want to miss out on debt cancellation while pursuing a lower interest rate.
Student Loan Forgiveness Programs
Income-driven repayment forgiveness. The federal government offers four main income-driven repayment plans, which allow you to cap your loan payments at a percentage of your monthly income. When enrolled in one of these plans, your remaining loan balance will be eligible for forgiveness after 20 or 25 years, depending on the plan. These plans are most beneficial for those with large loan balances relative to their income. Only 32 borrowers have received loan forgiveness through income-driven repayment forgiveness, according to the National Consumer Law Center. This forgiveness was made tax free retroactive to Dec. 2020 through the end of 2025, as part of the March 2021 American Rescue Plan. However, most borrowers will not qualify for forgiveness through income-driven repayment until the early 2030s.
Public Service Loan Forgiveness.Public Service Loan Forgiveness is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven tax-free after making 120 qualifying loan payments. Until Oct. 31, 2022, the Education Department has expanded which payments on federal student loans count toward PSLF through a limited waiver now, payments on FFEL and Perkins loans, late payments and payments made on any repayment plan will retroactively count as qualifying payments.
» MORE: How to get loan forgiveness through borrower defense to repayment
The Federal Student Loan Pause Will Likely Be Extended Through The End Of 2022
White House officials are zeroing in on canceling $10,000 for all borrowers who earn less than $150,000 per year, CNBC reports, but the administration has yet to confirm such plans.
In April, the Department of Education extended the pause on student loan repayment, interest and collections through Aug. 31, 2022, but Michelle Dimino, a senior education policy leader at Third Way, predicts the payment pause will be extended yet again through the end of the year, at least until after the midterm elections.
A recent poll from Data for Progress and Rise found that voters might be less likely to vote in the midterms if the Biden administration fails to provide adequate relief to borrowers.
Cardona and other top Biden officials have also made it clear that they are comfortable extending the pause during interviews. “We’re going to continue to monitor it,” Cardona told Cox Media Group in April. “Right now, we have August 31 and as you’ve seen in the past, we’ve been comfortable moving that date if needed.”
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Likely Future Student Loan Forgiveness Developments
The next event will occur when the U.S. Department of Education and Justice Department issue reports concerning the executive branchs legal authority to implement broad loan forgiveness without Congress.
These reports will likely conclude that the President does not have the legal authority to implement broad student loan forgiveness through executive action. This will force Congress to act. Congress might consider legislation to forgive student loans in the fall, as part of a budget reconciliation bill. The Biden Administration has repeatedly reiterated that the President would sign a bill offering $10,000 in federal student loan forgiveness to all borrowers.
The timing of loan forgiveness will also depend on which loans are eligible.
What Are The Chances That My Student Loan Debt Will Be Forgiven Completely
Not great, unless you owe $10,000 or less in federal loans. Biden campaigned on forgiving $10,000 of student loan debt, and recent reports indicate that student loan forgiveness would include an income cap.
According to Federal Student Aid Data, borrowers have an average of $37,014 in student loan debt, and 2.1 million borrowers owe more than $100,000 as of the first quarter of 2022.
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Putting Loan Forgiveness In Fiscal Perspective
In terms of its scale in budget and cost to taxpayers, widespread student loan forgiveness would rank among the largest transfer programs in American history. Based on data from the Department of Education, forgiving all federal loans would cost on the order of $1.6 trillion. Forgiving student debt up to $50,000 per borrower would cost about $1 trillion. Limiting loan forgiveness to $10,000, as President Biden has proposed, would cost about $373 billion. Under each of these proposals, all 43 million borrowers would stand to benefit to differing degrees.
To put those numbers in perspective, the chart below compares the cost of these three one-time student loan forgiveness proposals against cumulative spending on several of the countrys largest transfer programs over the last twenty years .
Forgiving up to $50,000 of student debt is similar in cost to the cumulative amount spent on Supplemental Security Income and all housing assistance programs since 2000. Supplemental Security Income provides cash assistance to 8 million people who are disabled or elderly and have little income and few assets. Recipients must have less than $2,000 in assets. About half have zero other income.
Will The Freeze On Student Loan Payments Be Extended Again
The deadline for ending the moratorium on federal student loan payments has been extended six times so far. The CARES act in March 2020 established the original forbearance in March 2020. President Donald Trump and the Department of Education extended the deadline twice.
Biden has pushed the end of the payment freeze back fourtimes since taking office. Many Democrats want the president to postpone the deadline until at least the end of 2022, but further extensions may depend on any plans from the White House to offer some form of widespread student loan forgiveness before September.
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Military Student Loan Forgiveness And Assistance
Not only does the military offer loan forgiveness for Army and Navy doctors, but it also helps armed forces members and veterans. The Army, Navy, Air Force and National Guard all offer loan repayment assistance programs.
- The Armys College Loan Repayment Program pays one-third of your loans every year for three years. In total, you could get up to $65,000 in aid.
- The Navy program also awards up to $65,000.
- The National Guard LRAP contributes up to $50,000.
There are plenty of other programs for military student loan forgiveness, so make sure you know what you qualify for.
Latest Student Loan Forgiveness Updates
As the Biden Administration continues to pursue its agenda with narrow majorities in Congress, it has taken a piecemeal approach to student debt relief while it explores its legal authority to pursue wider loan forgiveness programs without congressional support.
Most recently, an overhaul of the Public Service Loan Forgiveness program was announced to restore the promise of PSLF, according to the Education Department factsheet. A key aspect of the development is a one-time waiver that will allow payments from all federal student loan programs, including those not previously eligible, to be counted toward progress for Public Service Loan Forgiveness.
The Department of Education announced on August 19 that over 300,000 borrowers who have a total or permanent disability will receive $5.8 billion in forgiveness. The Department of Education would begin identifying borrowers eligible for the automatic discharge by matching data from the Social Security Administration.
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Expansion To The Payment Pause And Interest Waiver
Borrowers with a federally-held federal education loan are eligible for administrative forbearance and an interest waiver through January 31, 2022. Unfortunately, borrowers with defaulted loans in the Federal Family Education Loan Program were not eligible because those loans were held by guarantee agencies on behalf of the U.S. Department of Education. The U.S. Department of Education has decided to make these borrowers eligible for the federal student loan payment pause and interest waiver, affecting more than one million FFELP borrowers. FFELP borrowers who defaulted during the pandemic will also have their loans returned to good standing and the defaults removed from their credit histories.
The Complete List Of Student Loan Forgiveness Programs And Options
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Restoration Of Total And Permanent Disability Discharges
Some disabled borrowers who qualified for a Total and Permanent Disability Discharge had their repayment obligation reinstated because they failed to submit the annual earnings paperwork during the pandemic. The U.S. Department of Education will reverse the reinstatements and provide other student loan debt relief for 230,000 borrowers with Total and Permanent Disability Discharges.
How To Find Grants Yourself
You just have to know where to look.
Many student loan forgiveness programs are tied to your profession and where youre willing to worktheyre administered by organizations that want to encourage people with certain skills to work in a high-needs area, and they do that by paying off student loans.
There are profession-based student loan forgiveness programs administered at the state and federal level weve listed some of those above. You can also get your student loans forgiven by working in public service or enlisting in the military, as long as you qualify.
Another place to check, though, is with your college. Some colleges and universities will forgive student loans for those who agree to use their skills in a high-needs area.
For instance, law schools will often forgive a large chunk of student loan debt for public defenders, ahead of the Public Service Loan Forgiveness program. Check with your school to see if they offer this benefit.
Its also worth it to check for state-based student loan forgiveness programs for people in your profession. You may have to sign up to work in a high-needs area or low-income community to access this funding.
Finally, check with your employer. Some employers offer scholarships, grants, and student loan forgiveness benefits to people who work for them. The usual amount is somewhere around $1,200 a year , up to about $10,000.
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Student Loans: Key Things To Know
Corinthian Colleges.In its largest student loan forgiveness action ever, the Education Department said that it would wipe out $5.8 billion owed by 560,000 students who attended Corinthian Colleges, one of the nations biggest for-profit college chains before it collapsed in 2015.
New sources of aid.The Education Department will use one-time waivers and adjustments to retroactively credit millions of borrowers with additional payments toward loan forgiveness. The move will help people seeking to have their loans eliminated under the Public Service Loan Forgiveness program and through the use of income-driven repayment plans.
Payments delayed again.President Biden pushed the restart date for federal student loan payments to Sept. 1, extending a pause put in place at the start of the pandemic. Millions of borrowers who have defaulted on their federal student loans will also get a fresh start and have their loans restored to good standing.
The cost of private loans.As the Fed changes its benchmark rate, private student loan borrowers should expect to pay more, as both fixed and variable rate loans are linked to benchmarks that track the federal funds rate.
This has been a long time coming, said Nathan Hornes, a member of the Corinthian 15 who attended Everest College in Ontario, Calif.
Latonya Suggs, another participant in the original strike, said she had mixed feelings about the victory. It took way too long, she said. I struggled for years dealing with this.
Borrower Defense To Repayment
If you believe that the school you attended misled you or engaged in misconduct in violation of certain laws, the federal student loans you obtained to attend that school may be eligible for forgiveness, called Borrower Defense to Repayment. Learn more about the process, eligibility requirements and how you can apply.
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What If I’m On An Income
Income-driven repayment plans allow you to make payments based on your salary. After the term of your plan — usually 20 to 25 years — your loan balance is forgiven. If you were on an IDR plan before the freeze, you’ll receive credit toward IDR forgiveness for each month of the payment pause. Since you’re already receiving that credit, there’s not much incentive to pay during the moratorium if loan forgiveness is your ultimate goal.
If you’re working toward loan forgiveness through the Public Service Loan Forgiveness or Teacher Loan Forgiveness Program, all months of the student loan moratorium will also count toward your payments required for federal loan relief. Again, there’s little benefit to making payments during this time if this is your situation.
The Public Service Loan Forgiveness program was recently expanded. It cancels any remaining debt on direct student loans for qualifying public servants like teachers, firefighters, nurses, military members and government workers who make on-time payments for 10 years. If you previously applied for loan forgiveness through the PSLF and were denied, you may now qualify through the expanded requirements rolled out in October 2021.
Critics Say More Is Needed
Critics said the changes are a good first step, but dont go far enough. In a statement, National Consumer Law Center Director Abby Shafrof said: The Education Department left out the borrowers most harmed by past failures: borrowers who, unable to access an affordable payment option, went into default. Importantly, many borrowers with loans in default are low-income and would qualify for a $0 payment in IDR, but they end up paying significantly more in default, where income protections are largely stripped away.
Despite acknowledging that failed servicing and forbearance steering can often lead to default, the Departments announcement did not mention any remedy for borrowers who lost years toward forgiveness following servicing failures because their loans went into default. This oversight significantly reduces the number of borrowers who will receive immediate loan forgiveness through todays action, as over 2 million of the 4.4 million borrowers who have been in repayment for over 20 years are in default.
The Department should quickly fix this oversight, particularly as it works to implement a fresh start for borrowers in default by helping them to enroll in IDR not only is it the right thing to do for these borrowers, but it will also be easier for servicers to enroll borrowers in IDR if borrowers can see that they have already accrued meaningful time toward eventual loan forgiveness.
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Student Loan Forgiveness By State
As of September 2021, 48 states and the District of Columbia offer at least one student loan forgiveness program. There are a total of 130 state-level student debt cancellation plans in the U.S. Minnesota has 15 student loan forgiveness programsthe most out of any single state. Mississippi and North Dakota are the only states that do not currently have their own dedicated student debt cancellation options.
Most education loan forgiveness plans are designed to help borrowers in specific professions so as to attract more students seeking the same careers to a particular state . That this allows the state to potentially draw multiple kinds of workers into the local economy is also why a state might offer more than one program. Because economic circumstances will also differ by state, other variations are likely to exist among programs pertaining to the same careers. Below are the three areas that can differ the most from program to program.
Below is a list of each state student loan forgiveness program in the U.S.:
Student Loan Cancellation: Bidens Next Steps
What are Bidens next steps on student loan forgiveness? For now, Republicans cant stop Biden from announcing wide-scale student loan forgiveness. Multiple Republican senators have proposed legislation to prevent Biden from enacting wide-scale student loan forgiveness. As president, Biden has the right to announce a new policy to cancel student loans for millions of student loan borrowers. That said, this doesnt mean Biden has the legal authority to enact wide-scale student loan cancellation. Republicans in Congress as well as Speaker of the House Nancy Pelosi have argued that only Congress has the legal power to enact wide-scale student loan cancellation. However, Sen. Elizabeth Warren argues that Biden has existing legal authority under the Higher Education Act to cancel an unlimited amount of student loans for all student loan borrowers.
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