Student Loan Forgiveness: How You May Still be Eligible
After its sweeping student-loan forgiveness plan was struck down by the Supreme Court in June 2023, the Biden administration announced several new initiatives to provide debt relief for student-loan borrowers.
With student loan repayments set to resume in October after a multi-year pause during the pandemic, many borrowers are wondering if they qualify for relief under the new plans – or, if they don’t, what other options might be available to them.
To learn if you’re eligible for the new plans and what you need to do, and to understand other potential relief options, check out the resources we’ve gathered below. We’ll also give you the timeline for the end of the student loan payment pause.
IDR account adjustment
The Biden administration’s Department of Education announced in July that it would cancel $39 billion in federal student loans for 804,000 borrowers who are already engaged in what are known as income-driven repayment (IDR) plans.
Under the program, the department began notifying eligible borrowers that their loans were being automatically discharged. To qualify, borrowers had to have made at least 240 or 300 monthly payments under an IDR plan. To learn more about this relief plan, including eligibility criteria, see the Department of Education’s press release dated July 14.
NOTE: If you’re notified that you’re eligible for forgiveness, loan repayment will be paused until the discharge is processed, according to the Department of Education. Discharges will begin 30 days after borrowers receive emails notifying them of their eligibility. Your loan servicer should let you know when your student loan debt is discharged.
Saving on a Valuable Education
In June 2023, the Department of Education also introduced a new income-driven repayment plan known as Saving on a Valuable Education (SAVE), which replaces the Revised Pay as You Earn (REPAYE) plan. The SAVE plan is open to all federal student-loan borrowers who are in repayment. Once borrowers are enrolled, their payments could be cut in half (compared to other IDR plans); in some cases, they might not be required to make payments at all. Additionally, the plan eliminates all remaining interest after scheduled payments for both subsidized and unsubsidized loans and excludes spousal income for married borrowers.
The SAVE Plan's additional benefits, effective from July 2024, are designed to further reduce payments and enhance repayment management. These benefits encompass halving payments for undergraduate loans, forgiveness based on original principal balances, consolidation progress preservation, automatic credit for certain deferment and forbearance periods, and automatic enrollment in IDR for late borrowers who allow secure tax information access by the Department of Education. These measures aim to streamline repayment and provide more tailored options for borrowers.
You can now apply for the SAVE Plan through the updated IDR application, available in beta. If you've already enrolled in the REPAYE Plan or recently applied, you'll automatically transition to the SAVE Plan this summer, so you wouldn’t need to reapply. See further below for more information on the SAVE Plan.
Other relief options:
Despite the Supreme Court ruling that struck down the Biden Administration’s sweeping student debt relief plan, borrowers can explore several options for loan forgiveness:
1. Public Service Loan Forgiveness:
Eligible nonprofit and government employees can have their federal student loans canceled after ten years (or 120 payments) under the Public Service Loan Forgiveness program.
2. Forgiveness Options for Teachers, Nurses, and Others:
Full-time teachers in low-income schools may qualify for up to $17,500 in loan forgiveness under the Teacher Loan Forgiveness Program, while nurses can benefit from the Nurse Corps Loan Repayment Program.
3. State-Level Student Loan Forgiveness Programs:
Numerous states offer their own forgiveness programs, such as New York's "Get On Your Feet Loan Forgiveness Program," providing support to recent college graduates.
4. Military Service:
Service members can benefit from interest rate caps and student loan repayment programs as a recognition of their service, through the Servicemembers Civil Relief Act (may vary by state).
5. AmeriCorps:
Participants in approved AmeriCorps programs can receive the Segal AmeriCorps Education Award to help repay qualified student loans.
6. Other Options:
Additional types of loan forgiveness and discharge may be available under specific conditions. Please see below for examples.
Discharging a loan if you have a disability
Discharging a loan for a closed school
Borrower defense loan discharge
False certification loan discharge
Unpaid refund loan discharge
Other loan discharge options
Timeline for resumption of payments – and other important dates
To navigate the end of the student loan pause, borrowers need to be aware of crucial dates:
1. August 1, 2023: The SAVE Plan Application Opens -
Borrowers can switch payment plans or enroll in the new SAVE plan, offering reduced monthly payments and potential loan forgiveness in just 10 years. For those on other IDR plans, log in to StudentAid.gov and view your loans on your My Aid page to verify if you’re in the REPAYE Plan. If that’s not the case, you can switch to REPAYE or SAVE when it's accessible for SAVE Plan benefits. To apply, utilize the IDR application, indicating your loan servicer's lowest monthly payment plan preference.
2. ASAP: Re-certify Income for Income-Driven Plans -
Income-driven plan participants should re-certify income for income-driven plans within six months before August to ensure accurate monthly payments based on their current income.
3. ASAP: Sign Up for Auto-Pay -
Enrolling in auto-pay before August qualifies borrowers for a 0.25% discount on student loan interest. Sign up for autopay on your servicer's website. If you were enrolled in autopay before the payment pause, you likely need to re-enroll. Log in to find your servicer.
4. September 1, 2023: Student Loan Interest Resumes -
After being fixed at 0% since March 2020, federal student loans start accruing interest again.
5. October 2023: Federal Student Loan Payments Resume -
While payments are expected to resume in October, specific due dates may vary depending on the loan administrator.
6. September 30, 2024: On-Ramp Period -
The 12-month on-ramp period offers breathing room for borrowers to adjust to their monthly payments, and unpaid loans during this time are not considered delinquent or reported to credit bureaus.
In addition to forgiveness programs, borrowers can consider alternatives like switching repayment plans, consolidating loans, and applying for deferment or forbearance if they don't qualify for the above options. We cover these in detail here. Also, it's crucial to avoid scams and seek assistance only from authorized sources like the Department of Education and loan servicers, ensuring the safety of personal information and accounts.