President Biden’s one-time student loan cancellation program remains blocked by federal courts. Under the program, borrowers could receive up to $20,000 in student loan forgiveness. The administration has appealed to the Supreme Court, which will ultimately determine the fate of the program sometime next year.
But while the legal battle over Biden’s one-time cancellation program has left millions of borrowers in limbo, several other federal student loan forgiveness programs remain in place or are being expanded. And these programs can provide significant relief.
Here are the details.
Student Loan Forgiveness Through Income-Driven Repayment Changes
Income-Driven Repayment (IDR) describes a collection of federal student loan repayment plans based on a borrower’s income. These plans include Income-Contingent Repayment (ICR), Income Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). All of these plans provide for loan forgiveness after years of repayment — typically 20 or 25 years, depending on the plan.
The Biden administration is currently starting to implement the IDR Account Adjustment, a temporary initiative that can provide significant retroactive credit towards a borrower’s 20 or 25-year IDR repayment term. Under the adjustment, past periods of repayment under any repayment plan, and certain past periods of deferment and forbearance, can count towards IDR as if the borrower had been in an IDR plan (even if they were not). The Education Department anticipates that millions of borrowers will get closer to student loan forgiveness through the initiative, with tens of thousands receiving a complete discharge of their debt. The adjustment is expected to be fully implemented by July 2023. While much of the relief will be provided automatically, some borrowers may have to consolidate their loans to qualify.
The Education Department will also be releasing a new IDR plan next year. This plan will have lower monthly payments and a shorter repayment term for many borrowers. Key details have still not been released, but officials should provide updates in the coming months.
Student Loan Forgiveness through Temporary PSLF Flexibilities
Public Service Loan Forgiveness (PSLF) allows federal student loans to be discharged for borrowers who have devoted their careers to nonprofit or government employment. Borrowers can receive student loan forgiveness after 120 “qualifying payments,” the equivalent of 10 years (although the payments do not have to be consecutive).
The Limited PSLF Waiver program, which provided temporarily flexibilities allowing for past periods that otherwise would have been rejected to qualify towards PSLF, ended in October. However, the IDR Account Adjustment has effectively extended many of the benefits of the Limited PSLF Waiver, giving borrowers a second shot at retroactive relief. The Education Department has already approved $24 billion in federal student loan forgiveness for 360,000 borrowers through October.
Next year, new federal regulations updating the PSLF program will make more permanent changes to PSLF program requirements, making it somewhat easier for borrowers to qualify for loan forgiveness.
Borrowers can learn more about the temporary PSLF flexibilities through the Department of Education’s dedicated websites on the limited waiver, IDR Account Adjustment, and new PSLF regulations. Borrowers can submit required PSLF employment certifications using the PSLF Help Tool.
Student Loan Forgiveness for Borrowers Defrauded by their School
The Borrower Defense to Repayment program can discharge the federal student loan debt for borrowers who were misled by their educational institution. For example, misrepresentations about admissions criteria, the transferability of credits, or career prospects can be a basis for Borrower Defense to Repayment relief.
A federal court recently approved $6 billion in Borrower Defense relief for 200,000 borrowers who attended dozens of institutions accused of misconduct. And earlier this year, the Education Department approved a group Borrower Defense discharge for over 750,000 former students of Corinthian Colleges and ITT Technical Institutes, now-defunct institutions that collapsed under the weight of investigations.
But borrowers who aren’t covered by this relief can still apply by submitting a Borrower Defense to Repayment application. Next July, new federal regulations governing the Borrower Defense program will make it easier for some borrowers to request and receive relief.
Student Loan Forgiveness for Disabled Borrowers
Borrowers who are unable to maintain substantial, gainful employment as a result of a medical condition may qualify for a Total and Permanent Disability (TPD) discharge. The TPD discharge program can result in the complete cancellation of a borrower’s federal student loan debt. Borrowers can qualify if they meet the TPD discharge requirements as certified by the Veterans Administration (VA) or Social Security Administration (SSA), or they can have a physician certify that they meet the TPD standard.
The Biden administration has implemented some temporary initiatives to make the process easier for borrowers, including a new data sharing program between the Education Department and SSA to facilitate automatic discharges, relaxing post-discharge income-monitoring rules, and reversing the reinstatements of discharged loans.
Next summer, updated federal regulations governing the TPD Discharge program will codify many of these initiatives, and will make the TPD Discharge application process easier. Borrowers can learn more about the program and apply by visiting the Education Department’s dedicated TPD Discharge web portal.
Student Loan Bankruptcy Discharges
The Biden administration just recently announced new changes to federal student loan bankruptcy policies that may make it easier for some borrowers to discharge their federal student debt in bankruptcy.
Because of strict language in the bankruptcy code that treats student loan debt differently from other consumer debts, it can be difficult for borrowers to eliminate their student loans in bankruptcy. But the new federal policies will establish standards that can help the Education Department and Justice Department determine whether a borrower may meet the “undue hardship” discharge standard required by federal law, without forcing the borrower to go through a lengthy and costly litigation process.
Borrowers should consult with a consumer bankruptcy attorney to determine their legal rights and options under the new policies. You can find an attorney via the National Association of Consumer Bankruptcy Attorneys (NACBA), or by contacting your state or local bar association for a referral.