No, we’re not talking about the debt relief program President Biden announced. That has since been summarily blocked for the time being and stuck in courts on the Federal level[1]. The overview of that program was to get a relief of between $10,000 and $20,000 off the overall debt amount. The current status of Biden’s administration is in the appeals process with the Supreme Court and the matter is expected to be resolved early next year[2].
Regardless of the battles, this one-off cancellation attempt has done to the millions waiting for a solid answer, other types of forgiveness related to student loans are still there or expanding their reach. Therefore, they are worthwhile for you to see if you are eligible.
Let’s take a look below
Income Driven Repayment (IDR) Loan Forgiveness updates
IDR is a type of repayment schedule based on the income of the borrower, and there are a few different versions of them as well. There is Pay As You Earn, Income-Based Repayment and Income Contingent Repayment. Each plan comes with a loan forgiveness model that happens for either 20 or 25 years, depending on the program. Each program itself has different requirements as well.
The current administration is going to push through a temporary adjustment that will provide a credit retroactively with the number of years they have left before they can get forgiveness[3]. With this new plan in action, adjustments will be made for those with any prior periods where any repayment plan can help lower the necessary years. That’s inclusive in some cases in the past when the loans were in forbearance or deferment.
The Department of Education estimates that this will include millions who can take advantage of this adjustment and get just one step closer to forgiveness on their student loans. There are already some estimates where a big portion will have their debt completely discharged. This will come into place around July 2023. Keep in mind that this is primarily automated, but it’s a good idea to check and may require loan consolidation to ensure that they qualify[4].
Next year a completely new Income-Driven Repayment plan is set to launch[5]. It will include monthly payments, which are lower and shorter terms of repayment for numerous borrowers. The critical pieces of the plan are going to be shared down the line in the upcoming months.
PSLF provides additional flexibility for Loan Forgiveness
Public Service Loan Forgiveness, or PSLF, enables borrowers who have spent a pronounced portion of their career as either government or non-profit employees to eventually discharge their student loans completely. This typically happens with 10 years’ worth of payments which is calculated by 120 payments that qualify. There was also a program to get a waiver for periods in the past that may have rejected the ability to qualify for PSLF, but it has since stopped happening since October.
Yet the Account Adjustment for the Income-Driven Repayment plan has helped extend those benefits further, helping get that retroactive support to reduce the overall time needed to eliminate the loans. In addition, the Department of Education has taken another step to help hundreds of thousands of borrowers by approving $24 billion in student loan forgiveness[6].
Sometime in the new year, there will be more clarity and updates on the PSLF plan[7]. Then, the program will focus on permanent adjustments to make it simpler for borrowers to achieve loan forgiveness.
For those who want to discover more regarding the different components above, check out these informational sites directly coming from the government about the limited waiver[8], new PSLF regulations[9], and IDR Account Adjustment[10]. There’s also a useful help tool where you can submit documents such as employment as well[11].
Forgiveness for those who have been defrauded
Any borrowers who went to a school or educational institution that defrauded them can use the Borrower Defense to Repayment program to help get those federal loans discharged. If borrowers were misled for a wide variety of reasons, from the ability to transfer credits, criteria to gain admission, or what careers looked like afterwards; this can be the foundation to obtain this relief.
There has already been $6 billion awarded for a couple hundred thousand borrowers that went to institutions accused of foul play[12]. Another example recently was when over three-quarters of a million ex-students of universities, such as ITT or Corinthian Colleges, had their loans discharged since the institutions shut down.
Even if not fully covered by the relief above, borrowers should still consider submitting an application[13]. That’s because, in July 2023, there will be an update to the regulations that govern this program and make it a simpler process to get that necessary relief[14].
Forgiveness for those that are disabled
Anyone who has student loans and cannot keep employment consistently due to a medical condition could qualify for a discharge known as a Total and Permanent Disability. This program can completely discharge and eliminate federal student loans. There are a few ways to qualify, either through the Veterans Administration or through the Social Security Administration. A physician can also certify a qualifying condition to meet the standard.
The process is currently meant to be simpler, and in the summer of 2023, many of the temporary initiatives will become more permanent[15]. You can find more information about the TPD program here[16].
Discharging loans in bankruptcy
New changes have been made regarding bankruptcy and federal student loans, again making it easier for certain borrowers to get rid of their loans in a bankruptcy[17].
In the past, it was difficult or near impossible to get rid of student loans in bankruptcy due to some of the language itself, as student loans were not treated the same as other types of consumer debt. Yet new standards are being discussed of what qualifies as undue hardship that can make it easier to get those loans discharged without the need for an expensive and time-consuming legal battle.
Either way, don’t go it alone, and anyone considering this should work with a qualified bankruptcy attorney for consumers[18].
