- A new plan relying on the Higher Education Act of 1965 targets five different categories of borrowers and is estimated to provide relief to about 30 million borrowers.
- Income-Driven Repayment (IDR) changes resulting in payment count adjustments applied to all loans through the William D. Ford Federal Direct Loan (Direct Loan) Program and Federal Family Education Loan (FFEL) Program Loans. About $46 billion in loans has already been forgiven for more than 930,000 borrowers.
- Saving on Valuable Education (SAVE) Plan to make payments more affordable and offer forgiveness to many borrowers. Nearly 8 million Americans have enrolled in the SAVE Plan, and roughly $1.2 billion in debt has been forgiven for about 153,000 borrowers.
- Public Service Loan Forgiveness (PSLF) changes that allowed more payments to qualify for PSLF have already resulted in the cancellation of about $62.5 billion for nearly 872,000 borrowers.
- Total and Permanent Disability Discharge for borrowers identified as eligible based on a data match with the Social Security Administration (SSA) (a final rule simplifying the eligibility process went into effect July 1, 2023). About $14.1 billion has been forgiven for nearly 548,000 borrowers.
Although most of these may not be new, it is meaningful that the Administration is committed to pursuing this relief, especially after the US Supreme Court in Biden v. Nebraska shot down its initial forgiveness plan. Student loan forgiveness is certainly an issue at the top of many voters’ minds, and it could attract young voters who would see expanded opportunities to afford their loan payments more easily or qualify for a program like the PSLF.
The details of each program are outlined below, starting with the new announcement.
New Department of Education Rulemaking
This proposal (more information on the rulemaking process is available here) would target the following five categories of borrowers for relief:
- Borrowers who have seen their debt grow because of unpaid interest, canceling up to $20,000 for those who now owe more than they originally borrowed. For those borrowers making less than $120,000 or couples earning less than $240,000 who are also enrolled in an IDR plan, that $20,000 cap would not apply. Roughly 25 million Americans would be eligible for this relief, and 23 million would get their interest forgiven entirely.
- Borrowers eligible for other federal forgiveness programs (e.g., PSLF, SAVE, closed school discharge) but have not yet applied would receive loan debt cancelation.
- Borrowers who have been in repayment on their Direct Loans and Direct Consolidated Loans for 20 years or more would qualify for forgiveness. This would apply to those with only undergraduate debt if they first entered repayment at least 20 years ago and those with graduate school debt if they entered repayment 25 or more years ago. Participation in an IDR plan is not required.
- Borrowers who enrolled in low-financial-value programs or institutions that lost their eligibility to participate in the federal student aid program or were denied recertification because they cheated or took advantage of students. Borrowers who attended institutions or programs that closed and failed to provide sufficient value (e.g., large debt amounts and low earning potential) are eligible for relief.
- Borrowers who experience hardship in paying back their loans could see forgiveness. Those likely to default on their loans or through an individualized application can detail their financial hardship, preventing them from fully paying back their loan (e.g., childcare or medical expenses) may qualify.
Income-Driven Repayment Count Adjustments
In this article, we provided a breakdown of payment count adjustment for those previously in IDR plans, in the PSLF program, or interested in an IDR plan and have a Direct Loan or FFEL loan managed by the Department of Education. This adjustment could result in being closer to the end of your repayment period, automatic loan forgiveness, or a refund for any overpayment on your loans. If you wish to consolidate your federal loans, you must do so through an application process by April 30, 2024, to benefit from the payment count adjustment.
Saving on a Valuable Education Plan
The SAVE Plan was launched in August 2023, and it is an IDR plan that calculates payments based on a borrower’s income and family size instead of their loan balance and forgives the remaining balances after 20–25 years. Compared to the Revised Pay-As-You-Earn (REPAYE) plan, the Administration says that borrowers will see their total payments per dollar fall by 40 percent and save thousands of dollars. This plan is intended to help many who attended community colleges be debt-free within 10 years (if they originally borrowed $12,000 or less) and, on the whole, help Black, Hispanic, American Indian, and Alaska Native borrowers cut their total lifetime payments per dollar borrowed in half.
Borrowers enrolled in the REPAY Plan were automatically enrolled in the SAVE Plan and should see their payments automatically adjusted without taking action. The SAVE plan has already resulted in $1.2 billion in forgiveness for about 194,000 borrowers.
Public Service Loan Forgiveness
The Department of Education finalized a rulemaking that went into effect on July 1, 2023, to allow more payments to qualify for PSLF, including partial, lump sum, and late payments, and allow certain kinds of deferments and forbearances – such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service—to count toward PSLF.
Borrowers who consolidate their Direct Loans will receive a weighted average of existing qualifying payments toward PSLF. The rule also adopts a new single standard of full-time employment at 30 hours a week, which requires employers to give adjunct and contingent faculty credit of at least 3.35 hours of work for every credit hour taught.
