Federal student loan forgiveness update: See where the latest policies and proposals stand

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The Biden administration hasn’t made a decision when it comes to forgiving student loan debt for every borrower, despite pressure from progressive Democrats that have called on the president to issue an executive order that would wipe out millions of borrowers’ debt.

The administration’s latest moves toward student loan forgiveness suggest that widespread student loan cancellation, easier forgiveness qualifications and an extended break on student loan payments could be possible in the future. Led by Democrats, the latest student loan proposal aims to make forgiveness available to a wider range of students through reforms to the Public Service Loan Forgiveness (PSLF) program.

Here’s what to know about student loan debt forgiveness and how soon it could impact your student loan debt.

New proposal aims to make it easier to qualify for forgiveness

In early May, dozens of Democratic lawmakers signed and sent a letter to the U.S. Department of Education calling for reform to PLSF.

The letter says that because of implementation failures, many borrowers haven’t been able to access forgiveness through the program, especially frontline workers during the COVID-19 crisis.

Here are the four proposed amendments to PSLF:

  • Make all federal student loans eligible.
  • Make all repayment plans eligible.
  • Waive restrictions at time of forgiveness.
  • Automatically qualify borrowers.

PSLF is a federal relief program that forgives the student loan debt of borrowers that work in specific public service jobs and make 120 qualifying on-time payments. Experts have scrutinized the program over its eligibility requirements and strict documentation demands. This is the latest student loan forgiveness proposal from lawmakers as many await the results of the legal cancellation review.

What to know about Biden’s joint address

In his recent address, Biden shared plans for easing the cost of college, including providing Americans with two years of free community college and making college more affordable for low- and middle-income students.

Passing these large-scale proposals could be difficult, as both parties are divided on the matter, says Mark Hamrick, Bankrate senior economic analyst and Washington bureau chief. While there was mention of tuition-free community college, there was no mention of plans for canceling outstanding student loan debt.

What’s happening right now with student loan forgiveness?

In his most recent and obvious step toward mass forgiveness, Biden in early April requested that U.S. Secretary of Education Miguel Cardona oversee a legal review of whether cancellation of student loan debt without congressional approval is constitutional. The results of this review could help the Biden administration decide if forgiveness is an option, when it could happen and how much they would forgive.

“It appears that President Biden is trying to take a cautious and methodical approach to this question which is a bit of a fraught one from a political standpoint,” Hamrick says. “By asking for outside counsel to weigh in, there is the opportunity to essentially outsource some of the basis of his decision whether and how to move forward, if at all.”

While the results of the legal review are expected to take a few weeks, there is still pressure mounting for Biden to act quickly, especially from Democrats like Sen. Elizabeth Warren.

Federal student loan relief measures may be extended

Cardona recently said he isn’t ruling out the possibility of extending the federal student loan forbearance period that’s set to expire on Sept. 30 of this year.

“We’re looking at it,” he said during the 2021 Education Writers Association conference. “Obviously we’re going to always take lead from what the data is telling us and where we are in regards to the recovery of the pandemic.”

No official statement has been made on the extension. However, Cardona added: “It’s not out of the question, but at this point it’s Sept. 30.”

Warren’s Senate hearing highlights projected outcome of $50K in student loan forgiveness

On April 13, Warren held a hearing on new data from the Department of Education that highlighted how many borrowers would receive full forgiveness from mass student loan cancellation.

In 2020, Biden proposed forgiving $10,000 in federal student loan debt per borrower. Since then, Warren and other progressive Democrats have pushed Biden to forgive $50,000 per borrower. While Biden has opposed forgiving $50,000, he hasn’t completely written off forgiving a larger amount, according to a February tweet from White House Press Secretary Jen Psaki.

According to the Department of Education, just about 15 million borrowers would see their federal student loan debt completely forgiven under Biden’s $10,000 cancellation proposal, while about 36 million would see their debt erased under Warren’s $50,000 proposal.

Out of 44,972,000 federal student loan borrowers, here’s how many borrowers would see their total student loan debt completely forgiven with amounts between $10,000 and $50,000 per borrower.

Forgiveness amount up to
Source: Department of Education
Amount of loan Number of borrowers
$10K 15,022,000
$20K 24,161,000
$30K 30,030,000
$40K 33,669,000
$50K 36,062,000

Borrowers in default or delinquency would also benefit greatly from mass student loan forgiveness. Nearly 4.7 million borrowers in default would have their federal loan balances forgiven under Biden’s proposal, while 9.8 million borrowers would have full forgiveness under Warren’s proposal.

Congressional Democrats are hopeful that data highlighting the benefits of a larger forgiveness amount will nudge Biden in that direction. However, it is highly unlikely that Biden would forgive a larger amount. When asked about forgiving $50,000 during a CNN Town hall in February, he stated, “I will not make that happen.”

During the town hall, he argued that the funds used to forgive $50,000 per borrower would be better spent on providing early education for children in disadvantaged circumstances. He also argued that forgiving that large of an amount would disproportionately impact students who attended prestigious schools like Ivy League institutions.

“He is facing pressure from the more progressive members of his party to move more aggressively,” Hamrick says. “At the same time, there’s a challenge of and a problem with providing a benefit to some individuals who do not need assistance, including those who have financial means or are in a solid position with respect to current or future earnings which can be used to pay off this debt.”

Adds Hamrick: “I’m not convinced that Biden is sold on the idea generally. I think it is absolutely safe to say forgiveness is not terribly high on his priority list.”

What proposals for student loan forgiveness have been made?

In Biden’s first 100 days as president, a number of his administration’s proposals — some of which have become legislation — have already erased millions of dollars in student loan debt. Among them:

New stimulus package makes federal student loan forgiveness tax-free

In March, 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, leading some Congressional Democrats to hope that Biden is setting the stage for forgiveness in the near future.

Biden administration provides billions of dollars in federal forgiveness through revising borrower defense to repayment

Earlier this year, the Biden administration revised the borrower defense to repayment law and has made forgiveness easier to obtain. Borrower defense to repayment is a federal law that allows students full forgiveness of their student loan balance if their college closes or engages in fraudulent or illegal activity.

Revising the program will impact roughly 72,000 borrowers who received only partial forgiveness through the program under the Trump administration. Under the former administration, forgiveness was harder to receive and borrowers had only three years to prove eligibility. As a result, many received partial to no forgiveness.

Department of Education forgives federal debt for totally and permanently disabled borrowers

In late March, the Department of Education announced revisions to the Total and Permanent Disability (TPD) discharge program. The TPD discharge program allows borrowers who qualify as totally and permanently disabled to have their student loan debt discharged. This move is expected to provide over $1.3 million in forgiveness and impact 230,000 borrowers.

Prior to the revision, borrowers were required to submit three years’ worth of proof-of-income documentation. If they rose above the income cap or didn’t provide the correct documentation, their debt would be reinstated. Because of this, many borrowers were not able to take advantage of the program.

Borrowers will now be able to more easily qualify for the program and are not required to submit income documentation throughout the remainder of the COVID-19 pandemic.

What might happen in the near future?

When it comes to mass student loan forgiveness in the near future, it’s primarily resting on the results of the legal review, says Mark Kantrowitz, leading national student loan expert. “The fact that it’s taking some time suggests that it’s not going to be as clear-cut as people assume,” he says. “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. If Congress can’t come to a bipartisan resolution regarding forgiveness, they’ll start planning some kind of omnibus budget reconciliation bill to figure out how much money is available, Kantrowitz says.

“The limiting factor is going to be coming up with an increase in revenue and decreases in costs to offset the costs of forgiveness,” he says.

While there is no anticipated timeline, there’s probably a feeling that there’s a time limit with midterm elections in two years, 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, and then the Biden administration will presumably be able to give a more accurate timeline.

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 in a qualifying public service job for a required amount of time. You can have the remaining balance forgiven after 120 qualifying payments.
  • 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.

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