The Biden administration has been silent about widespread student loan forgiveness, despite pressure from progressive Democrats who have called on the president to issue an executive order that would wipe out millions of borrowers’ debt. However, the administration has been focusing on reforming existing programs with built-in student loan forgiveness.
Here’s what to know about student loan debt forgiveness and how soon it could impact your student loan debt.
The latest news on student loan forgiveness
While the Biden administration has been quiet on the prospect of mass student loan cancellation, it has forgiven billions of dollars in student loans so far by revising existing forgiveness programs. Here’s the latest on the recent relief efforts and how they could impact your balance.
Navient borrowers set to receive more than $1 billion in student loan forgiveness
A $1.85 billion settlement against student loan servicer Navient has resolved several allegations of dishonest and unfair lending practices. Attorneys general in 38 states and Washington, D.C., claimed that the servicer originated predatory private loans and pushed borrowers into unnecessary, costly forbearance periods.
Under the settlement agreement, Navient will be required to forgive $1.7 billion in private student loans for more 60,000 borrowers who took out private loans for for-profit schools. Navient will also be distributing individual restitution payments of $260 to approximately 350,000 federal borrowers who were led into unnecessary hardship forbearance periods.
At this time, borrowers don’t need to take further action to get the payments or forgiveness. Impacted federal borrowers will receive a postcard from the settlement administrator in spring 2022, and private borrowers will receive a notice from Navient regarding the loan cancellation by July 2022.
Biden administration extends loan payment relief through May
In December 2021, President Biden announced a 90-day extension of the student loan payment break that was originally set to expire in January 2022. The Education Department extended the forbearance period through May 1, 2022, citing impacts of the omicron variant as the reason for the extension.
Education Secretary Miguel Cardona also assured borrowers that the Education Department would use the extension to improve accountability within student loan servicing and better prepare servicers for the transition back into regularly scheduled payments.
Education Department overhauls Public Service Loan Forgiveness
In October 2021, the Biden administration announced major revisions to the Public Service Loan Forgiveness (PSLF) program that will allow more borrowers to qualify for student loan forgiveness.
Here are the key changes that have been rolled out:
- Eligibility requirements for loan types and repayment plans are temporarily relaxed.
- Federal employees and service members will receive automatic PSLF progress.
- All denied applications are under review to improve servicer accountability and oversight.
The limited PSLF waiver is available to borrowers who consolidate their loans (if applicable) and submit an application by Oct. 31, 2022.
Department of Education announces $5.8 billion in automatic student loan forgiveness for borrowers with disabilities
In late August 2021, the Department of Education announced it would revise total and permanent disability (TPD) discharge by introducing automatic verification. Borrowers who qualify for the program will no longer have to apply for loan discharge; moving forward, the program will use automatic data matching through the Social Security Administration (SSA) to identify eligible borrowers.
The department also indefinitely extended the pause on income verification requirements, a pause originally instated as a coronavirus relief measure. With this pause, borrowers who qualify for TPD discharge will no longer have to submit documentation verifying their income to prove eligibility. The department has also proposed eliminating the three-year income monitoring period entirely.
More than 47,000 service members have federal student loan interest waived
More than 47,000 service members deployed to areas that qualify them for imminent danger or hostile fire pay will have the interest on certain federal loans retroactively waived. This waiver applies to both current and former active-duty service members.
Thanks to new automatic data matching, service members will no longer have to apply for the interest waiver, eliminating a hurdle that prevented many from receiving benefits. With automatic data matching now in place, it is expected that 880 percent more service members will receive the interest waiver since 2019.
The U.S. Department of Education has forgiven billions of dollars for defrauded borrowers
The U.S. Department of Education has been rolling out thousands of approvals for borrower defense to repayment, a program that forgives student loan debt for borrowers who have been misled by their colleges. Recent waves of approvals sought to address a backlog that built up during the previous administration, during which time many borrowers were given only partial forgiveness.
In March 2021, the Department of Education announced that it would be revising the process for calculating relief, a change that affected approximately 72,000 borrowers. Since then, the department has granted borrower defense to repayment for 133,000 former ITT Tech students and 1,800 students who attended Westwood College, Marinello Schools of Beauty and Court Reporting Institute.
New stimulus package makes federal student loan forgiveness tax-free
In March 2021, a $1.9 trillion stimulus package — also known as the American Rescue Plan — included a provision that makes student loan forgiveness free from federal taxation through 2025.
The provision was introduced in March 2021 as the Student Loan Tax Relief Act and was led by Democratic Sens. Elizabeth Warren and Bob Menendez. Through the Relief Act, borrowers will not be responsible for paying federal taxes on their forgiven student loan debt from 2021 to 2025. This has primarily benefited borrowers who are enrolled in income-driven repayment programs, as they are no longer required to report their forgiven amounts as taxable income.
Mass student loan forgiveness would also be considered nontaxable under the provision.
What about mass student loan forgiveness?
Several congressional Democrats have long advocated for widespread student loan forgiveness for every federal student loan borrower, and Biden himself campaigned on the promise in 2020. In April 2021, Biden requested a legal review assessing his ability to forgive student loan debt via executive action. Nearly a year later, the results of that review have not been published.
“The fact that it’s taking some time suggests that it’s not going to be as clear-cut as people assume,” says Mark Kantrowitz, leading national student loan expert. “If the result of the review is that you do have the authority, then they could do it pretty quickly.”
If Biden doesn’t have the executive authority to enact forgiveness without Congress, things may get complicated. “The limiting factor is going to be coming up with an increase in revenue and decreases in costs to offset the costs of forgiveness,” Kantrowitz says. While there is no anticipated timeline, upcoming midterm elections could create a sense of urgency, Kantrowitz says. As far as student loan cancellation in the near future is concerned, everything will ultimately come down to the results of the legal review.
What student loan forgiveness options are available now?
Qualifying federal student loan borrowers always have forgiveness options available. Here are some of the top federal forgiveness programs and how you can take advantage of them.
- Public Service Loan Forgiveness: Must work for a qualifying government or nonprofit employer for 10 years. You can have the remaining balance forgiven after 120 qualifying payments on an income-driven repayment plan.
- Teacher Loan Forgiveness: Must work in a qualifying position at an eligible school for at least five years. You can have up to $17,500 forgiven, depending on the subject you teach.
- Nurse Corps Loan Repayment Program: Must meet eligibility requirements. You can receive forgiveness of up to 60 percent of your “total outstanding, qualifying, nursing education loans over the course of two years.” You can then request a third year for another 25 percent of your loans forgiven.
- Income-driven repayment plans: Must have eligible federal student loans. There are four standard income-driven repayment plans, and each requires you to pay a portion of your “discretionary income” for 20 to 25 years before having your loans forgiven.
- Forgiveness for military members: Must be a qualifying member of the military or an eligible veteran. There are multiple ways to receive forgiveness, and qualifying borrowers can have up to 100 percent of their balances forgiven.
- Forgiveness for doctors: Must be a specific doctor for a qualifying amount of time. There are multiple programs that offer forgiveness for doctors in eligible circumstances.
- Forgiveness for lawyers: There are a number of state-based relief programs that can help qualifying lawyers receive forgiveness. You can also receive up to $60,000 worth of forgiveness through the Attorney Student Loan Repayment Program.
- Forgiveness through AmeriCorps: People serving in AmeriCorps are eligible for 100 percent forgiveness if also granted the Segal AmeriCorps Education Award.