Student loan forgiveness: What to know about these 5 programs and how Biden has expanded them

Student loan forgiveness: What to know about these 5 programs and how Biden has expanded them

The federal government already has a number of programs that offer student debt forgiveness for certain groups of borrowers, usually after they make a specific number of payments.

There’s a debt relief program for nonprofit and government workers as well as one for borrowers who were defrauded by their colleges. Borrowers who are permanently disabled are also eligible for federal student loan cancellation.

Under Biden, some of these programs have been temporarily expanded, making it easier for some borrowers to qualify for forgiveness. The administration has approved more than $26 billion in targeted cancellation for over 1.3 million borrowers — more than under any other president.

Here are five forgiveness programs that currently exist for federal student loan borrowers and what Biden has done to modify them:

1. Public Service Loan Forgiveness

How it works:

The Public Service Loan Forgiveness program, which was created by Congress in 2007, allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments. The full remaining balance will be canceled.

The Department of Education began reviewing the first applications for PSLF in fall 2017.

Teachers, social workers, some nurses and doctors as well as government lawyers are some of the types of borrowers who may be eligible.

There are several limitations. First, a borrower must be working full time for an eligible government or nonprofit for at least 10 years.

Second, a borrower must have Federal Direct Loans and have made 120 loan payments under an income-driven repayment plan, which sets payments based on income and family size.

If all of those requirements are met and a borrower has submitted the PSLF form to the Department of Education, the government will cancel his or her remaining federal student loan debt.

More than 164,500 borrowers have received student loan forgiveness under the PSLF program, according to the latest government data. The average amount of debt canceled is nearly $64,000 per borrower. In total, more than $10.5 billion has been forgiven.

How Biden expanded the benefit:

Very few people received forgiveness under the PSLF program when borrowers were first able to qualify in 2017. Many borrowers reached 10 years of repaying believing they qualified for cancellation but instead found out that they had the wrong kind of loan or were making payments in the wrong kind of repayment plan.

In 2019, the US Government Accountability Office found that about 99% of PSLF applications had been rejected.
In fall 2021, the Biden administration temporarily expanded the program so that some of those borrowers could retroactively qualify for student loan forgiveness under PSLF.

Due to a one-year waiver, it no longer matters what kind of federal student loan a borrower has or what payment plan he or she is enrolled in. All payments will be eligible for the Public Service Loan Forgiveness program if the borrower was working full time for a qualifying employer.

Some borrowers don’t have to do anything and the Education Department will automatically review their payments. But borrowers who currently have a non-qualifying loan, such as the Federal Family Education Loan, must first consolidate their debt into a Direct Loan and then submit a PSLF form to show qualifying employment by October 31, 2022.

2. Teacher Loan Forgiveness Program

How it works:

The Teacher Loan Forgiveness Program cancels up to $17,500 in federal student loan debt for certain full-time teachers who have worked in a qualifying low-income elementary or secondary school for at least five consecutive years.
Math and science teachers who are considered to be highly qualified at the secondary school level, as well as special education teachers at both the elementary and secondary levels, are eligible for the full $17,500 of federal student loan forgiveness. Those who are considered highly qualified and teach other subject areas may receive up to $5,000 in loan forgiveness.

Both Federal Direct Loans and Federal Family Education Loans qualify for this forgiveness program.

How Biden has expanded the benefit:

Borrowers can potentially receive forgiveness under both the Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness Program, but normally not for the same period of teaching service. To receive debt relief under the latter, a borrower would have to make an additional 120 qualifying payments after working five years and benefiting from the Teacher Loan Forgiveness Program.

But this requirement is waived until October 31 thanks to Biden’s temporary Public Service Loan Forgiveness waiver explained above. That means that the period of teaching service that led to eligibility for Teacher Loan Forgiveness can count toward PSLF.

3. Borrower defense to repayment

How it works:

The borrower defense to repayment program delivers student debt relief to people who were defrauded by their college.

Generally, students who attended big for-profit colleges like Corinthian Colleges and ITT Tech that have been found to have misled students with inflated job placement numbers will qualify for forgiveness under the federal program.

There are some groups of students that the Department of Education has already determined are automatically eligible for borrower defense to repayment, like those who attended Corinthian Colleges from its founding in 1995 to its closure in April 2015.

But other students may have to apply for the debt relief, demonstrating how the schools misled them or engaged in other misconduct.

How Biden modified the program:

Under Biden, the Department of Education has made progress in whittling down a backlog of borrower defense claims that built up during the Trump administration.

At one point, more than 200,000 borrower defense claims were pending. Former Education Secretary Betsy DeVos made it clear that she thought the rule was “bad policy” that puts taxpayers on the hook for the cost of the debt relief without the right safeguards in place and made changes to limit its reach.
Since Biden took office, the Department of Education has canceled approximately $8 billion through borrower defense claims for borrowers who attended schools including Corinthian Colleges (Everest, Heald and WyoTech), ITT Tech, DeVry University, Westwood College and Marinello Schools of Beauty — to name a few.
In June, the Biden administration authorized the cancellation of an estimated $6 billion in federal student loan debt for about 200,000 borrowers as part of an agreement to settle a class action lawsuit filed in 2019 over the department’s handling of borrower defense claims. The agreement must still be approved by the court.

4. Income-driven repayment program

How it works:

Borrowers enrolled in one of the four types of income-driven repayment plans, known as IDR, are eligible for loan forgiveness after either 20 or 25 years of payments are made, depending on the specific plan.

These repayment plans allow borrowers to avoid loan default by lowering their monthly payments based on their income and family size.

About 9 million borrowers with more than $500 billion in outstanding federal student loans were using an IDR plan to pay off their debt as of March, according to the latest government data.
But the Department of Education and its student loan servicers have had trouble tracking borrowers’ payments. A recent report found that at least 3,000 borrowers enrolled in an IDR plan potentially had enough qualifying payments to be eligible for forgiveness as of September 1, 2020, but only 132 borrowers had received forgiveness by June 2, 2021.

How Biden expanded the benefit:

The Biden administration is making temporary changes to the program that officials say will bring 3.6 million borrowers in an income-drive repayment plan at least three years closer to receiving forgiveness.

To address the issue, the Department of Education is recounting payments for the vast majority of federal student loan borrowers.

The Department of Education will also now count time spent in forbearance of more than 12 consecutive months or for more than 36 months cumulative toward forgiveness under IDR. The review is meant to help borrowers who were steered into forbearance — which allows for a temporary stop in payments — when they could have benefited from enrolling in an IDR plan.

5. Total and Permanent Disability Discharge

How it works:

The federal government will wipe away federal student loan debt — including Direct Loans, Federal Family Education Loans and Perkins Loans — for borrowers who are totally and permanently disabled. Borrowers must provide documentation from a physician, the Social Security Administration or the US Department of Veterans Affairs to show that they qualify.
But paperwork required during a three-year monitoring period may have prevented thousands of eligible veterans from receiving the discharge, according to a GAO report.

How Biden expanded the benefit:

Last year, the Biden administration changed the rule so that the Department of Education can provide automatic discharges for disabled borrowers who are identified through administrative data matching with the Social Security Administration — without the borrowers submitting paperwork.

The move immediately resulted in the discharge of $5.8 billion in federal student loan debt for about 320,000 borrowers.

The Biden administration has temporarily waived the paperwork required during the three-year monitoring period and has also initiated a process to permanently eliminate the requirement.

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