What student loan forgiveness could mean for your student loans


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Student loan forgiveness advocates hope the Biden administration will approve a broad forgiveness. (Shutterstock)

During the election campaign, President Joe Biden promised to forgive much of the country’s student loan debt. Now those plans seem to be closer to reality.

While no details have been finalized, here’s what you need to know about the status of student loan forgiveness and how you might manage your loans in the meantime.

If you’re looking to refinance your student loans, visit Credible for view your prequalified student loan refinance rates from various private lenders, all in one place.

Will your student loans be forgiven?

Although no official plan has yet been announced, the Biden administration has indicated who may qualify for federal student loan forgiveness. Generally, you’ll have to stick to income limits, although 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 would not come under a debt cancellation plan.

More recently, the Biden administration said it was considering a plan to largely 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 a year to qualify, or be part of a household earning less than $300,000 if you’re married and file taxes jointly.

With no income limit, canceling up to $10,000 in federal student loans would completely wipe out federal student loan debt for about 11.8 million people, according to analysis by New York Fed economists . The average student borrower would benefit from $8,478, and nearly one in three defaulted loans would be forgiven under such a program. The cost to the American taxpayer would be $321 billion, according to the New York Fed’s analysis. Fewer people would benefit from an income limit of $150,000 a year, but the exact number is unclear.

Student loan relief from 2020 to today

The student loan forgiveness plans under consideration are different from the federal student loan benefits that the government enacted at the start of the COVID-19 pandemic.

The US Congress has imposed a moratorium on student loan repayment starting March 13, 2020, as part of the CARES Act 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 to the end of August.

Automatic payment plans have been suspended and the federal government has halted collections on defaulted loans. However, payments are expected to resume on September 1 – unless the administration extends the suspension again.

Interest rates on federal student loans fell to 0% under the moratorium, meaning no interest has accrued since then and all payments you’ve made have gone directly to the principal of your loan.

The Biden administration has also taken several other steps to cancel student loans under special circumstances. This includes changes to the Public Service Loan Forgiveness Program (PSLF) that make eligibility easier, such as increasing the number of payment types that can count toward the minimum needed to obtain loan forgiveness. The administration also canceled loans taken out by students at several for-profit schools that were determined to mislead students about their job prospects after attending, including DeVry University and ITT Technical.

Visit Credible for view your prequalified student loan refinance rates from various private lenders, all in one place.


Ways to Qualify for Federal Student Loan Forgiveness

Even if plans for blanket student loan forgiveness do not materialize, there are several ways you can find ways to get your federal student loans forgiven. These depend on the type of job you have and the repayment plan you are subject to. Forgiveness options include:

  • Cancellation of public service loans — Under the PSLF program, you can have your remaining Federal Direct Loans canceled 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 nonprofit organization, for your payments to count toward your total.
  • Loan forgiveness to teachers — With this program, you can have up to $17,500 of your direct loans or Stafford loans forgiven after five years of working at a low-income school or certain educational organizations. Special education teachers and secondary school science or math teachers are eligible for the full amount, while teachers of other subjects are eligible for a maximum of $5,000. You cannot count payments for both PSLF and Teacher Loan Forgiveness, so if you qualify for both, be sure to choose whichever will benefit you the most.
  • Income Oriented Repayment Plan — When it’s time to pay off your student loans, you can opt for an income-contingent repayment (IDR) plan. These plans allow you to pay a set percentage of your discretionary income for your loan, based on your income and family size. If your income increases, your monthly payment also increases. Under these plans, your remaining loans can be canceled after 20 or 25 years of payments, depending on the specific plan you choose.

You may be eligible for student loan cancellation or discharge if you become totally disabled or your school closes while you are enrolled.


What to do with your student loans today while waiting for possible debt forgiveness

Although there may be a possibility of wide loan forgiveness, it is still important to take steps to ensure that you are ready for the resumption of required payments at the end of August. Visit your loan officer’s website and make sure all of your information is still correct, such as your current address and contact information. Review all automatic payment information and consider taking this time to find a new payment plan that might work better for you than the one you were signed up for before the pandemic.

You can also consider consolidate your federal student loans into a direct consolidation loan. This allows you to combine multiple federal loans into one loan with one payment. You will have a fixed interest rate which is a weighted average of the rates you are paying on your current loans.

But be careful before refinancing federal loans into a private student loan. When you do this, you lose access to benefits and protections — like income-based repayment plans — as well as eligibility for any future government loan forgiveness.

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 what you are currently paying. Refinance your private loans in 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 for add or remove a co-signer of your loans.

If refinancing is right for you, visit Credible for a quick and easy view your prequalified student loan refinance rates from private lenders.


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