In recent months, the Biden administration has approved billions of dollars in student loan forgiveness for hundreds of thousands of borrowers. And more may be on the way.
But several of these initiatives are temporary, and borrowers have only a limited time window to apply or benefit from the relief before it ends. In many cases, borrowers may have to take action before a specific deadline to qualify for student loan cancellation.
Here’s what you need to know, and how to apply.
Student Loan Forgiveness Through PSLF Waiver
In October, the Biden administration enacted a new fix for the Public Service Loan Forgiveness (PSLF) program. PSLF is a student loan forgiveness program that can wipe out the federal student loan debt for borrowers who work for 10 years or more in qualifying nonprofit or government careers. To address years of poor oversight and mismanagement, the administration established the Limited PSLF Waiver program.
Under the Limited PSLF Waiver, past periods of repayment that otherwise would have been ineligible (including payments made under non-qualifying repayment plans, or on older FFEL loans) can be counted towards PSLF, provided the borrower was working in qualifying employment at the time. But the program is set to end on October 31, 2022 (advocates are urging the Biden administration to extend the relief, but there are no indications that officials will do this).
Here’s how to pursue the Limited PSLF Waiver initiative:
- Review the Department of Education’s detailed guidance on the Limited PSLF Waiver program.
- For borrowers who already have Direct federal student loans and have already certified their public service employment, no action may be necessary, as the Department of Education has indicated that it will be updating borrowers’ PSLF payment counts automatically.
- For borrowers who need to certify or re-certify their PSLF employment, or to check whether your employer qualifies for PSLF, you can start the process via the Department of Education’s PSLF Help Tool.
- The Department of Education indicates that borrowers with FFEL loans or Perkins loans would need to consolidate those loans via the federal Direct consolidation program by October 31, 2022 to qualify for the Limited PSLF Waiver. “Periods of repayment on loans before consolidation count” under the Limited PSLF Waiver initiative, says the Department. Borrowers can consolidate online via the Department’s website. Review the pros and cons of consolidating before proceeding. Note that the consolidation process can take a month or two, so don’t wait until the last minute if you need to consolidate.
- Borrowers with FFEL program loans should first verify that their employment qualifies for PSLF via the PSLF Help Tool above, before consolidating. If their employment qualifies, FFEL borrowers would need to consolidate those loans via the federal Direct consolidation program, and then submit their PSLF employment certification once their FFEL loans have been consolidated into a Direct loan.
Student Loan Forgiveness Under Income Driven Repayment Adjustment
The Biden administration announced an initiative in April to expand relief under income-driven repayment (IDR) plans, which includes plans like Income Based Repayment (IBR) and Pay As You Earn (PAYE). Under IDR plans, borrowers can get any remaining loan balance forgiven after 20 or 25 years (depending on the plan). But under the original rules, only time spent in repayment under an IDR plan would count.
Under the new initiative, which the Biden administration is calling the “IDR Adjustment,” past loan periods can count towards a borrower’s IDR repayment term, including any period of repayment, and certain periods of deferment and forbearance. Under the initiative, “Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan,” says the Department of Education.
Here’s how to pursue this program:
- Review the Department of Education’s guidance on the IDR Adjustment. Note that the IDR Adjustment will also benefit PSLF borrowers. The Department’s guidance on the Limited PSLF Waiver program reflects the IDR Adjustment, as well.
- For borrowers who already have Direct federal student loans, no action may be necessary, as the Department of Education has indicated that it will be implementing the IDR Adjustment automatically and will start publishing IDR tracking information sometime this fall.
- As with the Limited PSLF Waiver program, borrowers with FFEL loans would need to consolidate those loans via the federal Direct consolidation program to benefit from the IDR Adjustment. The Department of Education indicates that borrowers should do so “before we complete implementation of these changes, which is estimated to be no sooner than January 1, 2023.” Borrowers can consolidate online via the Department’s website. Review the pros and cons of consolidating before proceeding. Note that the consolidation process can take a month or two, so don’t wait until the last minute if you need to consolidate. As with the Limited PSLF Waiver, the Department indicates that “any time in repayment prior to consolidation on consolidated loans” can count under the IDR Adjustment.
- Note that the tax implications for student loan forgiveness under IDR plans may be complicated, depending on when exactly the student loan forgiveness occurs. Consult with a qualified tax advisor if you need to.
Student Loan Forgiveness For Borrowers Misled By Their School
The Biden administration is working on implementing two key initiatives through the Borrower Defense to Repayment program. Borrower Defense to Repayment is a federal student loan cancellation program designed to address certain types of misconduct by schools. Borrowers can apply for Borrower Defense relief if a school made false promises or misrepresentations about critical aspects of their degree program like admissions, career prospects, or transferability of credits.
For the first initiative, the Biden administration announced earlier this month that it will be cancelling the federal student loan debt incurred by borrowers who attended Corinthian Colleges, a national chain of for-profit colleges that closed in 2015 following accusations of widespread misconduct. Everest College, Heald College, and Wyotech were part of the Corinthian College umbrella.
The Department of Education also announced just last week a proposed settlement agreement with a class of student loan borrowers to resolve Sweet v. DeVos, a multi-year lawsuit over stalled Borrower Defense applications. Under the terms of the proposed agreement — which still must be finalized and approved by the court — borrowers who already submitted Borrower Defense applications and attended a covered school will get their applicable federal student loans forgiven. Other borrowers can still benefit from the Borrower Defense relief, however.
Here’s what you need to know:
- For borrowers who attended Corinthian schools (including Everest College, Heald College, and Wyotech), no action is necessary. The Biden administration has indicated that those borrowers will have their applicable federal student loans cancelled, regardless of whether they actually have submitted a Borrower Defense application.
- For the Sweet v. DeVos proposed settlement, borrowers who attended one of the 150-plus schools listed in the joint agreement who submitted a Borrower Defense application by June 22, 2022, would have their applicable federal student loans cancelled, once the proposed settlement is approved by the court.
- Borrowers who attended one of the schools covered under the Sweet v. DeVos, but have not yet submitted a Borrower Defense application, can still submit one prior to final approval of the settlement proposal, which attorneys for the case don’t expect to happen until sometime this fall. Such borrowers would not be entitled to automatic student loan cancellation, but under the proposed settlement, the Education Department would have to render a decision on those applications within 36 months or the borrower would be entitled to an automatic discharge. To learn more about the Sweet v. DeVos case and proposed settlement, and to review the list of covered schools, go here.
- Importantly, borrowers who did not attend one of the schools covered by Sweet v. DeVos can still submit a Borrower Defense to Repayment application, as the program itself does not expire. You can start the process on the Department of Education’s Borrower Defense website.