President Biden’s one-time student loan cancellation program remains blocked by federal courts. Under the program, borrowers could receive up to $20,000 in student loan forgiveness. The administration has appealed to the Supreme Court, which will finally decide the fate of the program sometime next year.
But while the legal battle over Biden’s one-off cancellation program has left millions of borrowers in limbo, several other federal student loan forgiveness programs remain in place or are being expanded. And these programs can bring significant relief.
Here are the details.
Student loan forgiveness through income-based repayment changes
Income-Based Repayment (IDR) describes a collection of federal student loan repayment schedules based on a borrower’s income. These plans include Income Related Refund (ICR), Income Related Refund (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). All of these plans provide for loan forgiveness after years of repayment—usually 20 or 25 years, depending on the plan.
The Biden administration is currently beginning implementation of the IDR account adjustment, a temporary initiative that can provide significant retroactive credit for a borrower’s 20- or 25-year IDR repayment period. As part of the adjustment, past repayment periods under a repayment schedule and certain past periods of forbearance and forbearance may count towards the IDR as if the borrower had been on an IDR plan (even if it was not). The Department of Education expects the initiative will bring millions of borrowers closer to student loan forgiveness, with tens of thousands receiving full debt relief. The adjustment is expected to be fully implemented by July 2023. While much of the relief is automatic, some borrowers may need to consolidate their loans to qualify.
The Ministry of Education will also release a new IDR plan next year. This plan has lower monthly payments and a shorter repayment period for many borrowers. Key details have not yet been released, but officials should provide updates in the coming months.
Student loan forgiveness through temporary PSLF flexibilities
Public Service Loan Forgiveness (PSLF) provides federal student loan redemption for borrowers who have dedicated their careers to nonprofit or government agencies. Borrowers can receive student loan forgiveness after 120 “qualifying payments,” which equals 10 years (although the payments do not have to be consecutive).
The Limited PSLF Waiver Scheme, which provided temporary flexibilities allowing past periods that would otherwise have been denied to qualify for PSLF, ended in October. However, the IDR account adjustment has effectively expanded many of the benefits of the Limited PSLF Waiver, giving borrowers a second chance at retrospective relief. The Department of Education has already approved $24 billion in federal student loan forgiveness for 360,000 borrowers as of October.
Next year, new federal regulations updating the PSLF program will make more permanent changes to PSLF program requirements, making it slightly easier for borrowers to qualify for a loan forgiveness.
Borrowers can learn more about the temporary PSLF flexibilities at the Department of Education’s dedicated websites on Limited Waiver, IDR Account Adjustment and the New PSLF Regulations. Borrowers can submit the required PSLF employment certificates through the PSLF Help Tool.
Student loan forgiveness for borrowers who have been scammed by their school
The Borrower Defense Repayment Program can pay off the federal student loan debt for borrowers who have been misled by their educational institution. For example, false information about eligibility criteria, loan transferability, or career prospects can be a basis for borrower defense up to repayment relief.
A federal court recently approved $6 billion in borrower defense assistance for 200,000 borrowers who visited dozens of institutions accused of wrongdoing. And earlier this year, the Department of Education approved a borrower’s defense class release for more than 750,000 alumni from Corinthian Colleges and ITT Technical Institutes, now defunct institutions that have collapsed under the weight of investigations.
But borrowers not eligible for this relief can still apply by filing a Borrower Defense Application. Next July, new federal rules for the Borrower Defense Program will make it easier for some borrowers to apply for and receive relief.
Student Loan Forgiveness for Disabled Borrowers
Borrowers who are unable to sustain substantial gainful employment due to a medical condition may be eligible for a total and permanent disability discharge (TPD). The TPD Relief Program can result in the complete cancellation of a borrower’s state student loan debt. Borrowers may qualify if they meet TPD discharge requirements certified by the Veterans Administration (VA) or Social Security Administration (SSA), or they may have a physician certify that they meet the TPD standard.
The Biden administration has launched some temporary initiatives to simplify the process for borrowers, including implementing data sharing between the Department of Education and the SSA to facilitate automatic discharge, relaxing post-discharge income monitoring rules, and the reinstatement of disbursed loans.
Next summer, updated federal regulations for the TPD relief program will codify many of these initiatives and simplify the TPD relief process. Borrowers can learn more about the program and apply by visiting the Department of Education’s dedicated TPD Discharge web portal.
Student Loan Bankruptcy Relief
The Biden administration just recently announced new changes to federal student loan bankruptcy guidelines that could make it easier for some borrowers to pay their federal student debt in bankruptcy.
Because of the harsh language in the bankruptcy law, which treats student loan debt differently than other consumer debt, borrowers can find it difficult to clear their student loans in bankruptcy. However, the new federal guidelines will set standards that can help the Department of Education and the Department of Justice determine whether a borrower can meet the “undue hardship” relief standard required by federal law without forcing the borrower to go through a lengthy and costly litigation.
Borrowers should consult a consumer bankruptcy attorney to determine their legal rights and options under the new guidelines. You can find an attorney through the National Association of Consumer Bankruptcy Attorneys (NACBA) or contact your state or local bar association for a referral.
More reading on student loan forgiveness
Here’s when borrowers will receive student loan forgiveness as part of Biden’s account adjustment
Will Biden find a way around student loan decree losses? 4 possible ways
$24 billion student loan forgiveness approved with waiver, Department of Education says, with more to come
Court authorizes $6 billion in student loan forgiveness for 200,000 borrowers to resolve lawsuit