When President Joe Biden was running for office, one of his chief student loan proposals was broad student loan cancellation — specifically, promises to cancel a sweeping $10,000 of federal student loan debt per borrower.
Biden has since focused his efforts on more targeted student loan relief, but the idea of broad student loan forgiveness has remained popular among Democrats. With that said, student loan cancellation does come with a few key caveats. Here’s what you should know.
What student loan cancellation won’t do
Even forgiving tens of thousands of dollars per borrower would not get rid of all student debt now and forever. Student loan forgiveness has many limitations and restrictions, and it wouldn’t solve all student debt problems for all borrowers.
It won’t cancel all debt
It’s easy to assume that student loan forgiveness means eliminating all student debt, but that won’t be the case. As of late 2021, the student loan debt amount totaled about $1.75 trillion, which would be a hefty bill for the government to foot.
Biden has discussed canceling $10,000 of student loan debt per borrower, while other politicians, such as Sen. Chuck Schumer and Sen. Elizabeth Warren, have pushed to forgive $50,000 of student loan debt per borrower. If you have tens of thousands of dollars in student loans, you may still have student loans left to pay even if cancellation measures pass.
It won’t help past or future borrowers
The kind of widespread student loan forgiveness that many Democrats are advocating for would be offered as a one-time deal, not as a new policy. It would not apply to those who have already paid off their student debt, and it would not offer forgiveness to any future borrowers.
It may not apply to all current borrowers
Not all borrowers would qualify for student loan forgiveness, as this measure would likely only apply to federal student loans. Borrowers with private student loans would still be on the hook for any payments.
It’s also possible that there could be an income threshold for forgiveness — meaning if you make above a certain amount, you might not be eligible.
It won’t change the price of college
Biden has discussed the need for cheaper or free college education. However, his proposal for two free years of community college was dropped from the Build Back Better bill during negotiations, and there are currently no plans to reduce the cost of four-year college. Because of this, borrowers would continue to amass debt even if forgiveness passes.
What student loan forgiveness options do you have?
Even if the promise of mass student loan forgiveness never materializes, there are several routes toward student loan forgiveness that have existed for years. Borrowers will need to meet some eligibility requirements to qualify — in other words, forgiveness is not automatic or guaranteed — but they’re options worth pursuing.
Public Service Loan Forgiveness
Borrowers who work for a nonprofit or government organization may qualify for Public Service Loan Forgiveness (PSLF). PSLF forgives any remaining federal student loan balance after 120 qualifying payments on an income-driven repayment plan while working for an eligible employer.
Because of the requirements involved in reaching forgiveness, PSLF has traditionally been tricky to navigate. However, a temporary PSLF waiver is in place through Oct. 31, 2022, which opens up eligibility to more types of loans and repayment plans. If you consolidate your loans and apply for PSLF before that date, you may make automatic progress toward forgiveness.
Income-driven repayment plans use your income and family size to determine how much you pay on your federal student loans every month — typically your bill will be 10 or 15 percent of your discretionary income. After 20 or 25 years of these payments, your remaining balance will be forgiven. Federal Direct Loans are eligible for this program, as are FFEL loans in certain plans. Some other loans are eligible if consolidated first.
Teacher Loan Forgiveness
Teacher Loan Forgiveness is a specific forgiveness program for teachers who work for five consecutive years at a low-income school. Meeting the requirements will result in partial student loan forgiveness.
Secondary mathematics and science teachers can have up to $17,500 forgiven, as can elementary and secondary special education teachers. Other teachers may receive up to $5,000.
Borrower defense to repayment
Students who were defrauded by their university or college can apply for borrower defense to repayment, which will cancel the federal student loans incurred for education at those schools. During the Trump administration, many of the requests for borrower defense to repayment forgiveness were completely or partially denied. The Biden administration has sought to correct those errors and grant more forgiveness for students.
Total and permanent disability discharge
Total and permanent disability (TPD) discharge is a federal program that forgives the federal loans of borrowers who become disabled. This program may discharge Direct Loans, FFELP loans and Perkins Loans.
Typically, most borrowers will need to go through a three-year monitoring period after receiving a TPD discharge, but the U.S. Department of Education has temporarily waived these requirements due to the coronavirus. In August 2021, the Department of Education also announced that it would be revising its systems to automate the discharge process based on data from the Social Security Administration.
How to manage your student loans without forgiveness
It’s hard to say what will happen with student loans in the future, as President Biden has turned his focus away from widespread forgiveness policies. The feasibility of such a plan is still uncertain, but there are a few things you can do to manage your student loans in the meantime.
Take advantage of the interest-free period
Most federal student loans are currently exempt from interest charges and required payments. These terms will remain in place through Aug. 31, 2022.
If you are able, use the interest-free period as an opportunity to get ahead on your student loans. Pay as much as you can now before interest starts accruing again, or put the money you would be paying toward other debt, like private student loans or credit card debt.
Apply for a different repayment plan
While federal student loan borrowers are automatically enrolled in the standard 10-year repayment plan, there are other options for those struggling with monthly payments, including income-driven repayment plans and loan consolidation. Both of these options could lower your monthly payment by lengthening your repayment term. With the former, you’ll make payments over 20 to 25 years, while the latter could stretch your repayment by up to 30 years.
Refinance your loans
Both federal and private student loans can be refinanced through private lenders. While refinancing your federal loans will cause you to lose the current 0 percent interest period and other federal loan benefits, it could be smart to refinance your private loans.
Refinancing your private student loans could get you a lower interest rate, which could help you save on interest in the long run. You could also refinance to a longer repayment period, which would decrease your monthly payment and free up more cash flow in your budget.
Use deferment or forbearance
If you have trouble making your student loan payments, consider applying for deferment or forbearance with your lender. Both allow you to forgo making payments on your student loans, though it’s possible that interest will continue to accrue. Most federal loans are in automatic administrative forbearance through Aug. 31, 2022, but forbearance options for private loans vary by lender.