Millions Of Americans Have Had $25b In Student Loan Debt Forgiven: Who Why And How
Peter Butler
How To and Money writer
I’m a writer/editor for CNET How-To and Money, living in South Berkeley, CA with two kids and two cats. I enjoy a variety of games and sports — particularly poker, ping-pong, disc golf, basketball, baseball, puzzles and independent video games.
What’s happening
President Biden still hasn’t announced his decision on widespread student loan forgiveness, but millions of borrowers have already had $25 billion in debt canceled during his term.
Why it matters
With one in five Americans owing student debt, loan forgiveness can help ease the pain of soaring inflation and economic uncertainty.
Time is running out on President Joe Biden to make a decision on federal student loan forgiveness. The pause on student loan payments expires on Aug. 31, and borrowers will be asked to resume payments after more than two years of forbearance.
Biden campaigned in 2020 on a platform of canceling a “minimum of $10,000” in student loan debt for everyone and on April 28 promised a decision “in the next couple of weeks,” but months have passed with no action on widespread student loan relief. About one in five Americans owe money on student loans for a total of $1.6 trillion, or an average of $37,013 per borrower.
Cancelling Student Loans Invariably Benefits Wealthier Americans With Graduate Degrees
Graduate school debt accounts for more than 40 percent of all outstanding student loan debt. This includes student loans for medical school, dental school, business school and law school. While each of those degrees can cost hundreds of thousands of dollars in tuition, student loan borrowers who hold these degrees tend to earn significantly higher income
cancelling student loans for all student loan borrowers would mean that high-income borrowers receive student loan forgiveness, even if they can afford their student loan payments
The above argument ties into the finding that upper-income households owe the most, according to the Department of Education , Bank of America Global, the Brookings Institution and the Federal Reserve.
Heres What You Can Do Now
Until the President signs an executive order or a bill, nothing is certain. Thats why experts say you should hope for the best, but plan for the worst when it comes to your student loan debt. Regardless of what happens with legislation on student loan forgiveness, heres how you can make the most out of the current situation.
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Extension For Federal Payment Suspension
Joe Biden extended the federal loan payment suspension and interest waiver for the third time on December 22, 2021. As a result, until May 1, 2022, federal student loans would be free of interest.
There was no mention of a loan cancellation or forgiveness program in that announcement. But President Biden encouraged borrowers to play their part in preparing for repayment.
After the Administration stated in August that its announcement would be the final extension of the CARES Acts loan interest waiver, it came as a bit of a surprise.
Jen Psaki, White House Press Secretary, said Biden had not decided when he was asked the day before about the possibility of the president enacting more loan forgiveness or extending the payment freeze.
Borrowers are waiting for information about significant student loan forgiveness, as promised by President Biden during his campaign. And its uncertain whether the payment moratorium will be prolonged beyond August 2022.
The Biden Administration has chosen a gradual approach to student loan relief as it investigates its legal power to seek larger loan forgiveness schemes without congressional approval. It continues to pursue its agenda with slim majorities in Congress.
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Air Force College Loan Repayment Program
The main Air Force College Loan Repayment program is paused in 2018 . This program allowed you to get up to $10,000 in student loan debt paid off in 3 years.
However, the Air Force JAG student loan repayment program is still active. You can receive up to $65,000 in student loan forgiveness if you go into JAG in the Air Force.
You can learn more about this program here.
How Much Could Be Forgiven
At the moment, the main point of contention among student loan forgiveness proponents is over how much debt should be scrapped: $10,000 or $50,000?
If all federal student loan borrowers got $10,000 of their debt forgiven, the outstanding education debt in the country would fall to around $1.3 trillion, from $1.7 trillion, according to Kantrowitz. And roughly one-third of federal student loan borrowers, or 15 million people, would see their balances reset to zero.
Canceling $50,000 for all borrowers, on the other hand, would shrink the country’s outstanding student loan debt balance to $700 billion, from $1.7 trillion. Meanwhile, the debt for 80% of federal student loan borrowers, or 36 million people, would be gone entirely.
Even under that more generous plan, not everyone would be entirely happy. One-fifth of federal student loan borrowers owe more than $50,000, and around 7% of borrowers have balances over six figures.
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Student Loan Forgiveness For Nurses
If you have a nursing degree, you have a few options for obtaining student loan forgiveness. First, you can apply to work in an underserved community in the United States for at least two years under the Nurse Corps Loan Repayment Program. This program offers 60% forgiveness on loans for nurses who work in underserved areas for two years and an additional 25% forgiveness for those who remain for a third year of employment.
Nurses who work for the government or not-for-profit organizations could also be eligible for forgiveness through the PSLF program mentioned above.
Who Is Eligible For Pslf
To qualify for PSLF you must be employed full-time by a US federal, state, local or tribal government agency — this includes the military — or a nonprofit organization. You must have federal Direct Loans or other types of federally backed loans that have already been consolidated into Direct Loans and you must make 120 qualifying payments . Examples of borrowers who qualify for PSLF are workers like teachers, nurses and firefighters who serve their local communities.
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Where Biden Stands On Debt Cancellation
Members of Congress have urged Biden to cancel $50,000 in debt per borrower. But the president has reiterated that if he used his authority for broad loan forgiveness, it would not be for more than $10,000 per borrower.
At a news conference on April 28, he said: “I am considering dealing with some debt reduction I am not considering $50,000 in debt reduction. But I’m in the process of taking a hard look of whether or not there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”
During a news conference on May 3, former White House spokesperson Jen Psaki said Biden was considering relief for borrowers making less than $125,000 a year, confirming speculation that any debt cancellation would likely be targeted.
No provision in Bidens 2022 budget proposal included broad student loan forgiveness. He had proposed forgiveness in the following instances during his presidential campaign:
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If you attended a public college or university. Attendees of private historically Black colleges and universities and additional minority-serving institutions would also be eligible.
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If you used the loans for undergraduate tuition.
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If you earn less than $125,000. Bidens plan referenced a phaseout of this benefit but did not offer further details.
Since there is no formal forgiveness proposal, there are no details about which loans might be canceled.
Faculty Loan Repayment Program
The Faculty Loan Repayment Program from the Health Resource and Services Administration helps recruit and retain health professions faculty members by encouraging students to pursue faculty roles in their respective health care fields. This is vital for preparing and supporting the next generation of educators.
You can receive up to $40,000 in student loan repayment, along with extra money to help offset the tax burden of the program.
You can learn more about this program here.
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Student Loan Forgiveness Programs: Where It All Began
Student loan forgiveness programs have been in place for 15 years. The Public Service Loan Forgiveness Act was passed by Congress in 2007 and signed by President George W. Bush.
The bill aimed to assist public officials in having their education loans forgiven in exchange for serving in the government.
Despite this, over 99 percent of loan debtors were turned down for the cancellation program.
Education Secretary Miguel Cardona and Joe Biden collaborated to make student loan forgiveness simpler and more accessible for borrowers.
How Do I Get Loans Forgiven
Getting student loans forgiven has two basic parts: consolidating all your loans into one debt, then applying for forgiveness by filing a special application: Federal Student Aids Public Service Loan Forgiveness & Temporary Expanded PSLF Certification & Application. Remember, if you wish to apply or reapply under the temporarily looser restrictions, you must request loan consolidation and submit the application by Oct. 31, 2022.
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Misconception #: Deferring Costs Will Make Living Simpler
Student loan deferment is what is when you briefly do not have while making costs, you may or may not nevertheless be accountable for attention, with respect to the kind of mortgage you have got. But its not available to any or all. There are only several different ways to perhaps be eligible for deferment, including while you are with the effective-obligation military solution, serving from the Serenity Corps, otherwise into passion.
However, regardless of if their consult try supplied, the mortgage doesnt go-away. Deferment is simply saying you can easily deal with it later. Thatll end up hurting your a lot more eventually, specifically if you still need to shell out attention.
Federal Employee Student Loan Repayment Program
The Federal student loan repayment program permits agencies to repay Federally insured student loans as a recruitment or retention incentive for candidates or current employees of the agency.
This plan allows Federal agencies to make payments to the loan holder of up to a maximum of $10,000 for an employee in a calendar year and a total of not more than $60,000 for any one employee.
It’s important to note that an employee receiving this benefit must sign a service agreement to remain in the service of the paying agency for a period of at least 3 years.
An employee must reimburse the paying agency for all benefits received if he or she is separated voluntarily or separated involuntarily for misconduct, unacceptable performance, or a negative suitability determination under 5 CFR part 731. In addition, an employee must maintain an acceptable level of performance in order to continue to receive repayment benefits.
Furthermore, you must sign up for this program when you’re hired. You can’t go back to your HR department after you’re already employed and ask for it.
You can learn more about this program here.
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What Other Policy Changes Should I Know About
The Department of Education said in its statement that it will continue to roll out and update its policies in the coming months as it attempts to get the PSLF program back on track.
Correction, Jan. 25: This article previously stated that private loans would be eligible for student loan forgiveness under the new waiver. That was incorrect. In addition to Direct Loans, only FFEL loans — which are federally backed, but often issued by private lenders — Perkins Loans and other federal loans may qualify for the PSLF waiver.
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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.
In response, the DOE is implementing Operation Fresh Start for borrowers who are currently in default. Borrowers who have eligible federal loans that were in default will automatically have those loans returned to good standing. This will make it easier for borrowers to apply for PSLF or sign up for IDR programs, and boost their credit scores. Wage garnishment will end as well.
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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.
Usda Veterinary Medicine Loan Repayment Program
This is a program for those who practice veterinary medicine. This program will pay up to $25,000 each year towards qualified educational loans of eligible veterinarians who agree to serve in a NIFA-designated veterinarian shortage situation for a period of three years.
You can find out the timing and learn more information about this program here.
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You Can Prioritize Other Financial Goals
With student loans in the rearview, high-income earners will have the most financial options. But the lack of a student loan payment is a welcome change to any budget.
Plan to first use the money you usually put toward student loans on essentials. After that, you can expedite life choices you may have previously delayed such as:
Does The Current Student Loan Payment Pause Affect My Pslf Eligibility
No. Federal student loan payments have been on pause for over two years, currently slotted to expire on Aug. 31. Under the PSLF, each of those paused payments counts as a qualifying loan payment during this time. So, if your payments were paused for 26 months, that counts as 26 on-time payments, bringing you closer to your goal of 120.
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Teacher Loan Forgiveness Program
Teachers who work full-time in educational service organizations or low-income schools can get up to $17,500 in student loan debt canceled. Science, mathematics, and special education teachers are eligible for the total sum.
Depending on your student loan balance, you may be eligible for greater forgiveness under the PSLF Program. However, for Teacher Loan Forgiveness and PSLF, you cant earn credit for the same qualifying payments or service time.
Who Is Eligible?
Highly qualified teachers have worked in low-income educational institutions for at least two years and work full time.
Types Of Loans Eligible
Both FFELP and Direct loans are included.
How To Apply
After youve taught for a minimum of five years in a row and completed the Teacher Loan Forgiveness Application, you can seek to have your student loans forgiven.
For How Long Will The Loans Be Forgiven?
After five consecutive years of teaching, you arent eligible for Teacher Loan Forgiveness. The servicer typically processes the application within a few months of receiving it.
Important Limited Pslf Waiver
On October 6, 2021, the U.S. Department of Education’s office of Federal Student Aid announced a temporary period during which borrowers mayreceive credit for payments that previously did not qualify for PSLF or TEPSLF. This change will apply to student loan borrowers with Direct Loans,those who have already consolidated into the Direct Loan Program, and those who consolidate into the Direct Loan Program by October 31, 2022.For more information on the limited PSLF waiver, visitStudentaid.gov/pslfwaiver.
Key Points: Summary of Changes Under the Limited PSLF Waiver
The qualifying employment requirement has not changed.
Learn more about how this limited PSLF waiver may impact your loans.Act soon the waiver ends October 31, 2022.You can also contact us with questions.
Note: Servicing for the PSLF Program is managed by another federal student loan servicer.If you enroll in PSLF, your eligible loans will be transferred from Great Lakes to the PSLF servicer.If your loans have already been transferred to the PSLF servicer, you can log in to their borrower portal to track your PSLF payment counts.
Also note: if you received Teacher Loan Forgiveness, under the limited PSLF waiver, the period of service that led to your eligibility will count toward PSLF. Refer to StudentAid.gov’s Limited PSLF Waiver page and contact us to discuss whether you may be eligible to receive PSLF under the temporary waiver. Act soon the waiver ends October 31, 2022.
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