Struggling to keep up with the student loan news? You are not alone. With the regulatory changes and expansions in student loan forgiveness programs all over the headlines, it is hard to keep the facts straight. As a borrower, it is essential to plan for the possibility of student loan forgiveness to prioritize the right financial goals.
In this article, we will demystify the major events that have defined the conversation around student debt relief, explore the influences that have shaped the landscape, and see the current status of forgiveness programs. Lastly, we will also provide practical tips for borrowers to manage their student loan debt. First, let’s take a moment to understand how this issue has evolved under the Biden administration.
Student Loan Forgiveness Under Biden
Student Loan debt has been inching into the political limelight for the past several years as more and more borrowers take on debt to go to college. The national student debt surged past $1.7 trillion in 2024 with the average borrower shouldering $28,950. It is no wonder 54% of college students are forced to take out loans with the overall cost of college increasing by nearly 180% over the past 20 years!
Just when you would think it couldn’t get any worse for borrowers struggling to pay back their loans, the COVID-19 pandemic crashed in. This caused economic hardship and worsened the challenges faced by borrowers, making repayment difficult for many.
In response to this crisis, the federal government enacted measures to pause federal student loan payments, interest, and collections. While this provided temporary relief during the pandemic, it also spurred calls for widespread student loan forgiveness among politicians.
President Biden advocated for relief openly in his presidential campaign in 2020. Despite the Biden administration’s efforts to reduce the outstanding student loan debt by approximately $430 billion, the Supreme Court intervened in late June of 2023, halting the president’s initiative. This decision devastated borrowers who had previously received approval for up to $20,000 in student loan relief. The federal government resumed federal student loan payments, suspended since March 2020, in October 2023.
Current Status and Implementation Challenges
In February 2024, President Biden announced the approval of $1.2 billion in student debt cancellation for roughly 153,000 borrowers enrolled in the SAVE repayment plan. Although this is a step forward for their plans, it falls short of the relief promised by the broader $430 billion forgiveness plan, leaving many borrowers burdened by overwhelming debt.
Enacting student loan forgiveness and repayment policies in the U.S. has been challenging because of several key obstacles. One major hurdle is the significant cost of widespread forgiveness. The original $430 billion plan raised concerns about its impact on the federal budget and taxpayers, complicating efforts to secure funding without creating new economic problems.
Equity and fairness are also contentious issues. Critics argue that broad forgiveness could disproportionately benefit higher-income individuals, neglecting low-income borrowers with greater financial need. This debate highlights the need for targeted relief that addresses disparities in student loan debt burdens and ensures equitable distribution of benefits.
Understanding Repayment and Forgiveness Options
In the wake of this cancellation, many borrowers are asking, what now? Is student loan forgiveness still available? The short answer is yes, but challenges lie ahead for borrowers navigating the debt landscape.
The complexity of existing repayment programs, like Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF) plans, adds another layer of difficulty for borrowers eligible for loan forgiveness. If you have student loans, it’s important to develop knowledge of the forgiveness programs out there so you can plan accordingly. Let’s go over the most popular repayment plans:
Income-Driven Repayment (IDR) Forgiveness
How do Income-Driven Repayment plans work? An IDR plan adjusts your payments based on what you earn, making them more affordable and helping to prevent the financial strain that comes with high monthly payments on a low income.
What’s more, these plans come with loan forgiveness after 20 or 25 years, or as low as 10 years of payments with the new SAVE plan, giving borrowers hope for a brighter financial future.
The downside to enrolling in one of these plans is you may pay more in interest over time while waiting for the forgiveness to kick in. But for those borrowers struggling to make ends meet, this program is a welcome reprieve. Use this Loan Simulator from the Department of Education to compare plans, estimate monthly payment amounts, and see if you’re eligible for IDR loan forgiveness.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a federal program designed to ease the financial burden of student loan debt for individuals working in public service careers. Eligible borrowers who work full-time for qualifying employers, such as government agencies, nonprofit organizations, and certain other public sector jobs, can have the remaining balance on their federal student loans forgiven after making the requirements.
To qualify for PSLF, borrowers must meet specific criteria regarding employment and repayment, including working full-time for a qualifying employer and making 120 on-time, qualifying payments. Once the borrower meets the requirements, the government forgives the remaining balance on their federal student loans, allowing them to move forward.
Getting your loans forgiven under a PSLF plan is no easy task. Around 98% of people who applied for this forgiveness between November 2020 and September 2021 were denied, most because they had not made the 120 on-time payments. Over 97% of those who applied met the employer requirements.
Planning and ensuring all your paperwork is in order if you’re interested in PSLF is important. The US Department of Education recommends using their PSLF Help Tool to apply.
Other Options
For borrowers facing unique challenges, the Biden administration has expanded the budget and made it easier to get your loans forgiven. For example, suppose your school closed or misled you about your degree. In that case, you might be eligible for forgiveness under the school-related discharge options like Closed School Discharge and False Certification Discharge.
Additionally, if you are a teacher, you might be eligible for Teacher Loan Forgiveness. This rewards the dedication of educators working in high-need areas by offering up to $17,500 in loan forgiveness after five complete and consecutive years of service, providing financial relief, and encouraging continued commitment to the teaching profession.
Suppose you become disabled in the course of your life and still have student loans. In that case, the Total and Permanent Disability (TPD) Discharge offers a compassionate solution for borrowers facing severe health challenges, allowing them to discharge their loans if they are unable to work due to a total and permanent disability. On the other hand, if you have served or are serving in the Military, there’s another pathway to loan forgiveness. Military Service Loan Forgiveness programs recognize sacrifice and service to the US.
Practical Student Loan Tips for Borrowers
Student loans are often overwhelming, but with the right financial strategy, you can manage your debt responsibly and work towards a debt-free future. Here are a few tips to help you on your debt-payoff journey:
- Build an Emergency Fund: Start saving a small amount each month to build an emergency fund. Having savings can provide a financial cushion and help you avoid turning to credit cards or loans in case of unexpected expenses that prevent you from making student loan payments on time.
- Take A Look at Your Budget: Do you know how you are spending your money? Track your spending for at least one month and see if there are ways you can save. While it may not sound like much, that $5 latte and $10 lunch out can add up. Use these savings for the next tip.
- Make Extra Payments When Possible: If you can afford it, making extra payments towards your student loans can help you pay off your debt faster and reduce the total interest you’ll pay over time.
- Get A Side Gig: There has never been a better time to find ways to earn more. From food delivery to dog walking, most can add more to their incomes. Apply this extra income to pay off your student loan debt faster.
- Stay Informed: Keep up to date with changes in loan repayment options, interest rates, and tax benefits related to student loans. Understanding your options can help you make informed decisions and manage your loans more effectively.
Takeaways
As we look ahead, the future of student loan forgiveness under the Biden administration remains uncertain. While the SAVE repayment plan represents a step forward, it falls short of the relief promised by the broader forgiveness plan. It’s essential for borrowers to proactively manage their student loans, stay informed about developments in student loan policies, and explore the resources and assistance available to them. By taking control of your financial future and leveraging the support and resources provided, you can work towards alleviating your debt burdens and achieving financial stability.
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Understanding the complexities of student loan forgiveness and repayment can be overwhelming, but you don’t have to do it alone. Schedule a meeting with a financial mentor today to receive personalized guidance tailored to your financial situation. A mentor can help you develop a customized debt-payoff plan, explore available forgiveness options, and empower you to take control of your financial future.
Don’t wait—take the first step towards achieving financial freedom and peace of mind by connecting with a mentor who knows your unique challenges and goals. Schedule Your Session Now!