Understanding if Your Student Loan is Forgiven Out of $25 Billion


Upon President Biden's inauguration, many people anticipated a large-scale student loan forgiveness plan. While there may not be as much student loan relief as many people had expected, there’s been $25 billion in student loan cancellations! It’s important to make sure that you understand what this means for student loan debt for plenty of Americans across the country.

How Are Student Loans Forgiven?

There are three methods for canceling student loans. Only loans that met the criteria could be forgiven. This includes:

  • Public Service Loan Forgiveness (PSLF)
  • Permanent Disability
  • Defense Claims

Discharge of Loans Under the Public Service Loan Forgiveness (PSLF) Program

The Department of Education (ED) announced in October 2021 that the Public Service Loan Forgiveness (PSLF) program would go through some serious changes. Due to the adjustments, 22,000 borrowers were immediately eligible for debt forgiveness! The ED anticipates that after making adjustments to this program, more than 550,000 borrowers who consolidated their loans will be eligible for debt forgiveness.

As soon as the borrower has made 120 qualifying monthly payments, the remaining balance on their student loans is canceled. Borrowers who work for a local, state, or federal government agency are the only types of borrowers who can be eligible for this program. This could include:

  • Teachers
  • Firefighters
  • Members of the military
  • Nurses
  • Other employees in the public sector

This program has so far helped 127,000 borrowers of student loans cancel billions in debt under President Biden's administration. Due to modifications made to the program, borrowers may now count both Perkins Loans and Federal Family Education Loans payments. Furthermore, borrowers can ignore the need of making on-time, full-amount payments. It is crucial to keep in mind that to take advantage of this relief option, borrowers must submit a PSLF application. The application deadline is October 31, 2022.

Check out the PSLF tool online if you want further details about this program. This tool can assist borrowers to find out whether or not the agency they work for qualifies for the PSLF or Temporary Expanded Public Service Loan Forgiveness (TEPSLF) programs. Besides that, this tool includes details on how to handle the application process, the necessary steps to take to qualify, and more.

Discharge of Student Loans for Borrowers with Disabilities

In August 2021, the ED made another regulation modification. With this modification, 323 million borrowers of federal student loans who meet the eligibility requirements for a disability now have the option of loan forgiveness. Borrowers who qualify for help do not even need to apply. Whether or not they qualify will instead depend on reviewing the borrower’s information from the Social Security Administration (SSA). This identification process, which began in September 2021, takes place every three months.

Discharge of Student Loans for Defense Claims Against Specific Schools

Some academic institutions deceived and even scammed borrowers when it came to student loans. They did so by claiming that these borrowers had the right to submit "borrower defense claims" to the ED. Borrowers may be eligible for a whole or partial cancellation of their student loans if it is determined that these educational institutions broke state law. Discharges of student loans may include the following:

  • Corinthian Colleges: On June 1st, it was announced that $5.8 billion would be forgiven for 560,000 borrowers.
  • DeVry University: $415 million in student loan cancellations were issued to 16,000 students. For other eligible students as well, there was extra forgiveness.
  • ITT Technical Institute: 115,000 borrowers got loan cancellations totaling $1.1 billion in August 2021.
  • Marinello Schools of Beauty: In April, 28,000 borrowers got loan cancellations totaling $238 million.

You should submit an official borrower defense claim to get relief if you attended any of the above institutions as a student and owe money from a student loan. To do so, you should visit the Federal Student Aid website. The entire application procedure will take about 30 minutes. After you submit your application, the ED will contact you via email to provide information and relevant details regarding your debt discharge.

What If Your Student Loan Is Not Eligible for Relief?

In case your student loan does not qualify for relief, there are still things you can do to make this loan easier to handle. You can make it easier for you to manage your student loan in a variety of ways like the following:

  • Take into account an Income-Driven Repayment Plan
  • Ask for information about deference or forbearance
  • Look into options for loan forgiveness or repayment assistance

Take Into Account an Income-Driven Repayment Plan

Income-driven repayment plans may be available to borrowers of federal student loans. There are four different types of these plans, which are available through the ED. Students can benefit from these plans since they let borrowers cut their monthly payments to 10% to 20% of their discretionary income. The factors that determine this income include household income, poverty guidelines, and so on. In addition to reducing the monthly payment, they also extend the payback period to 20 or 25 years. The remaining loan balance is forgiven once this period is over.

Ask for Information About Deference or Forbearance

Asking about deference or forbearance options could be beneficial whether you have a federal student loan or a private student loan. For those who are struggling financially, these options are a great opportunity. They can temporarily suspend the monthly loan payment for some specific time. It is crucial to keep in mind that while you are not making monthly payments, interest will continue to rack up on your loans.

Look Into Options for Loan Forgiveness or Repayment Assistance

In general, borrowers must meet particular qualifications to be able to benefit from this opportunity. This is the ideal choice for borrowers seeking a long-term support solution. Meanwhile, they can look for temporary support alternatives. Your particular circumstances will determine the opportunities that are available to you. For instance, there are state-based and federal debt repayment assistance programs for those who work in certain professions such as:

  • Health care provider
  • Military personnel
  • Public defender
  • STEM worker
  • Teacher

On top of that, some employers offer assistance with student loan repayment through employee benefits.

Bottom Line

Not all students qualified for student loan forgiveness. Borrowers of student loans can only have the following loans canceled:

  • Public Service Loan Forgiveness (PSLF)
  • Permanent Disability
  • Defense Claims

There are still options available that might be able to help you manage your student debts if your loan has not been forgiven. You can try one of the following methods:

  • Take into account an Income-Driven Repayment Plan
  • Ask for information about deference or forbearance
  • Look into options for loan forgiveness or repayment assistance

There may be more available options for help than you believe. Contact the financial aid office at your school if you need any additional help. They might be able to give you further details that will help guide you in the right direction.

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