On the campaign trail, President Joe Biden promised to forgive a large portion of the country’s student loan debt. Now, those plans appear to be closer to reality.
Though no details have been finalized, here’s what you need to know about where student loan forgiveness stands and how you might handle your loans in the meantime.
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- Will your student loans be forgiven?
- Student loan relief from 2020 until today
- Ways to qualify for federal student loan forgiveness
- What to do with your student loans today while you wait for possible loan forgiveness
While no formal plans have yet been announced, the Biden administration has indicated who may qualify for federal student loan forgiveness. Generally, you’ll need to fall within income limits, though reports have put those limits in the six figures. Another important note: Any plan would only apply to federal student loans, held by some 37.9 million borrowers nationwide. Private student loans wouldn’t fall under a debt forgiveness plan.
More recently, the Biden administration said it’s considering a plan to broadly forgive up to $10,000 in federal student debt for each borrower, according to multiple media reports. The plan under consideration would require you to earn less than $150,000 per year to qualify, or be in a household earning less than $300,000 if you’re married and file taxes jointly.
Without income limits, forgiving up to $10,000 in federal student loans would completely wipe out the federal student loan debt of about 11.8 million people, according to an analysis by economists at the New York Fed. The average student loan borrower would benefit by $8,478, and nearly one in three delinquent loans would be forgiven under such a program. The cost to the U.S. taxpayer would be $321 billion, according to the New York Fed analysis. Fewer people would benefit with an income limit of $150,000 per year, but the exact number is unclear.
The student loan forgiveness plans under consideration are different from the federal student loan benefits that the government enacted at the beginning of the COVID-19 pandemic.
The U.S. Congress put a moratorium on student loan payments starting on March 13, 2020, as part of the CARES Act law responding to the coronavirus pandemic. The payment pause has been extended eight times since then — most recently in April 2022, when the Biden administration pushed the moratorium through the end of August.
Automatic payment plans have been suspended, and the federal government has stopped collections on loans in default. However, payments are set to resume on Sept. 1 — unless the administration extends the suspension again.
Interest rates on federal student loans have dropped to 0% as part of the moratorium, meaning no interest has accrued since then and any payments you’ve made have gone straight to your loan principal.
The Biden administration has also taken several other actions to forgive student loans in particular circumstances. This includes changes to the Public Service Loan Forgiveness (PSLF) Program that make it easier to qualify, like increasing the number of types of payments that can be counted toward the minimum needed to have loans forgiven. The administration has also forgiven loans taken out by students at several for-profit schools that were determined to have misled students about their job prospects after attending, including DeVry University and ITT Technical.
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Even if plans for broad student loan forgiveness don’t come to fruition, you can find several ways to have your federal student loans forgiven. These depend on the type of job you have and the repayment plan you’re under. Forgiveness options include:
- Public Service Loan Forgiveness — Under the PSLF Program, you can have your remaining federal Direct Loans forgiven after you make 120 qualifying monthly payments (10 years’ worth) under a qualifying payment plan. You must work full-time for a qualifying organization, including a state or local government entity, the U.S. military, or a not-for-profit organization, for your payments to count toward your total.
- Teacher Loan Forgiveness — With this program, you can have up to $17,500 of your Direct Loans or Stafford Loans forgiven after five years of working in a low-income school or certain educational organizations. Special education teachers and science or math teachers in secondary schools are eligible for the full amount, while teachers of other subjects are eligible for up to $5,000. You can’t count payments toward both PSLF and Teacher Loan Forgiveness, so if you qualify for both, be sure to choose the one that will benefit you most.
- Income-driven repayment plan — When it’s time to pay back your student loans, you may opt for an income-driven repayment (IDR) plan. These plans allow you to pay a set percentage of your discretionary income toward your loan, based on your income and family size. If your income rises, so does your monthly payment. Under these plans, your remaining loans can be forgiven after 20 or 25 years of payments, depending on the specific plan you pick.
You may qualify for a student loan cancellation or discharge if you become totally disabled or if your school closes while you’re enrolled.
While there may be a chance of broad loan forgiveness, it’s still important to take steps to make sure you’re ready for required payments to resume at the end of August. Visit your loan servicer’s website and make sure all your information is still correct — like your current address and contact information. Review any automatic payment information, and consider taking this time to find a new payment plan that may work better for you than the one you were enrolled in pre-pandemic.
You may also consider consolidating your federal student loans into a Direct Consolidation Loan. This allows you to combine multiple federal loans into a single loan with one payment. You’ll have a fixed interest rate that’s a weighted average of the rates you were paying on your current loans.
But be careful before refinancing federal loans into a private student loan. When you do this, you’ll lose access to benefits and protections — like income-based repayment plans — as well as eligibility for any future loan forgiveness from the government.
If you have private student loans and your financial situation has improved since you took them out, you may qualify for a lower interest rate than you’re currently paying. Refinancing your private loans into a new private loan could potentially save you thousands of dollars in interest over the life of your loans. You can also refinance your student loans to add or remove a cosigner from your loans.
If a refinance is right for you, visit Credible to quickly and easily see your prequalified student loan refinancing rates from private lenders.