Written By Travis Hornsby, CFA®, CFP®
President Joe Biden's plan to cancel $10,000 to $20,000 of federal student loan debt for millions of borrowers was struck down by the Supreme Court. However, he has continued to push through other significant student loan initiatives, such as the PSLF Waiver, IDR Waiver and the new SAVE plan.
And now, the Biden administration is moving forward with “Plan B” student loan forgiveness to try and cancel debt through the Higher Education Act.
We'll cover what President Biden is planning to do with student loans in 2024 and beyond.
The key parts of the Biden student loan plan
Biden's plan for student loans during his first term can be broken down into five parts:
- Cancellation of $10,000 to $20,000 (blocked)
- A new income-driven repayment plan that will lower payments for most borrowers (implemented)
- A pause on monthly payments and interest (ended)
- A PSLF Waiver and IDR Waiver that will grant far more credit to borrowers seeking student loan forgiveness (implemented)
- Increased scrutiny on schools' costs, particularly for profit schools (implemented)
- “Plan B” student loan forgiveness (pending)
It's clear that President Biden's plan for student loans is more aggressive and bolder than most anyone anticipated. We'll go into greater detail on each plank of the Biden student loan plan below.
1. Broad student loan cancellation
The administration planned to cancel up to $10,000 of student debt for all households earning less than $125,000 individually or $250,000 as a married couple. Pell Grant recipients, which represent about 60% of all federal student loan borrowers, would have received up to $20,000 of cancellation.
Over 16 million people had already been “approved” for cancellation, but the Supreme Court blocked the plan.
Currently, the administration is trying to figure out how to cancel debt through the Higher Education Act.
2. A new Biden IDR plan (income-driven repayment)
A new income-driven repayment plan called Saving on a Valuable Education (SAVE) will allow undergrads to pay 5% of their income, down from 10% currently. It will also provide faster debt forgiveness to borrowers with balances below $12,000, and negative interest accrual will essentially end.
The White House, Congress and many student loan advocates have called for simplification of the income-driven repayment plans.
We have yet to see if this new IDR plan will accomplish this, but it's extremely aggressive in its generosity to borrowers.
According to the initial press release, borrowers with both graduate and undergraduate debt would pay “a weighted average rate.”
It suggests the following:
- Borrowers with graduate student loans WILL meet eligibility requirements for the new IDR plan.
- If you have 50% undergraduate debt and 50% graduate debt, your IDR payment percentage would be 7.5%. If you had 80% undergraduate debt, your IDR payment percentage would be 6%. If you have 90% graduate debt, your payment percentage would be 9.5%.
The federal poverty line for most IDR plans is currently 150%. This Biden SAVE IDR plan would allow borrowers to pay $0 on income up to 225% of the federal poverty line. This won't be a game changer for higher-income borrowers, but it might result in lower federal student loan payments and savings in the $100 to $200 a month range for many.
Extra relief for graduate borrowers in the Biden SAVE IDR plan
Graduate school borrowers could see far more relief under this Biden IDR plan than undergraduate borrowers despite not seeing as much payment relief.
The reason? Interest will no longer accrue if your required IDR payment is less than the interest owed.
How would this work in practice?
Imagine a lawyer owes $200,000 from law school and must pay $500 a month under her IDR plan. She would not see her balance grow.
In contrast, if that borrower was a 4th-year Big Law associate and her IDR payment was $2,500 a month, her payment would fully cover her interest, so there would be no subsidy.
So essentially, this new plan would be the REPAYE plan on steroids (REPAYE subsidizes 50% of all unpaid interest).
And because undergraduate borrowers might owe $30,000 while a graduate school borrower might owe many multiples of that, the graduate school borrower will receive more in interest subsidies than the payment benefit the undergraduate borrower receives.
That said, if the grad school borrower is pursuing forgiveness, the interest subsidy doesn’t really matter as the remaining balance is forgiven anyway.
3. The final extension of the student loan payment pause
Remember the story “The Boy Who Cried Wolf”? President Biden said that January 31, 2022, would be the final extension of the student loan pause, only to go back on that after pressure from the Democratic Congressional delegation when the Build Back Better Act did not pass.
The President stated in his August 24, 2022 announcement emphatically that the student loan pause would finally end December 31, 2022. Then he backtracked again.
The final extension of the student loan pause can only be trusted as the final pause because of a bill passed by Congress that forces the pause to end. Borrowers started accruing interest again September 1, 2023.
4. Expansion of IDR forgiveness and Public Service Loan Forgiveness
The IDR Waiver and Public Service Loan Forgiveness program Waiver are game changing for borrowers who have been in student loan repayment for many years. While the PSLF Waiver has technically expired, it's functionally available through the the IDR waiver until April 30, 2024.
Under these two programs, the administration will count most types of payments, forbearances, and deferments towards the 10, 20, and 25 year repayment periods needed to receive total forgiveness under PSLF and IDR respectively.
The PSLF Waiver and IDR Waiver combined could result in hundreds of billions of cancelled loans.
The PSLF waiver is far broader than this, and it’s incredibly disappointing that only $40 billion has been canceled out of an estimated $140 billion+.
5. Holding schools accountable
This plan is the least aggressive in the Biden plan for student loans. The Education Department will publish a watch list of schools with the worst debt outcomes in the country.
They will also require certain schools to adhere to institutional improvement plans.
This does little to fix the student loan problem. Most schools with bad outcomes are for profit, but most schools with the largest debt to income ratios are actually graduate and professional schools with good employment outcomes.
A Barber Institute that charges $10,000 but can't place students into jobs can be a bad return on taxpayer dollars just as a dental school in New York can be that charges $600,000 for a degree where students earn $120,000 after graduation. Yet the administration is seemingly doing little to fix these problems.
While these accountability measures are a welcome improvement, our expectation is that they would be targeted at for-profit schools that are mostly on the way to shutting down anyway, without much scrutiny brought to nonprofit universities, which are also big contributors to the student loan crisis.
Sweet v. Cardona did bring some measure of relief to borrowers who attended for-profit schools. But this effort was mild in comparison to other student loan initiatives.
6. Trying for “Plan B” student loan forgiveness
President Biden's “Plan B” student loan forgiveness plan uses a different statutory authority than his original mass cancellation plan that was struck down in June 2023. This new plan will provide targeted student debt relief to specific groups of borrowers in hopes that the narrowed scope of relief will pan out legally.
This new forgiveness initiative is still in its development stage. Final regulations are expected in May 2024, followed by a period of public comment. That said, it can't go into effect until July 2025. So, implementation will also depend on who wins the 2024 presidential election.
Legal authority of student loan cancellation
The Department of Justice (DOJ) and the Department of Education both evaluated the authority of the President to cancel student debt, and both found that he could. DOJ produced a 25 page report.
The Department of Education further found that President Trump’s Education Department was incorrect in saying that the President could not cancel student debt.
Many lawyers on social media raise the point that no one has standing to challenge this decision.
The Supreme Court disagreed and blocked the cancellation plan. Missouri could also sue on behalf of MOHELA again to block cancellation through Biden's plan B through the Higher Education Act.
Could a lawsuit block student debt cancellation or the New IDR Plan?
One part of the Biden student loan plan that is much safer is his new IDR plan. A court would be unlikely to overturn or block any of the IDR plan changes the administration is making since they went through the normal negotiated rule-making process.
However, the president's political opponents could seek to challenge the new IDR plan in court, arguing it's not really a repayment plan but a forgiveness plan. We'll have to stay tuned to see.
What happens if Biden loses the 2024 presidential election?
If President Biden loses the election, the new SAVE plan could be replaced with an income-driven repayment plan that Republicans are more aligned with. In which case, Trump would likely issue an executive action overturning SAVE by July 2026 or July 2027. He wouldn't be able to nix the SAVE plan immediately because of how the regulatory calendar works.
What's next for student loans if President Biden wins re-election?
If President Biden wins a second term, there will likely be more in store for student loans on a large scale. If Democrats are able to perform a clean sweep and win Congress and the White House, we might be looking at big changes, such as:
- Extending tax-free treatment of student loan forgiveness permanently.
- Additional rulemaking to push through more student loan forgiveness for more borrowers.
- Aggressively canceling student debt through “Plan B” forgiveness.
However, if Republicans are able to control one of the two chambers of Congress, we'll likely see aspects of student loans (e.g., expiring tax-free forgiveness provision) being used to negotiate for GOP-led initiatives.
How to get the most forgiven under Biden’s student loan relief plan
Make sure your contact information is updated with your student loan servicer and agree to text message updates if possible. Check your email regularly and call your servicer if you receive an email to make sure the email is legitimate.
Biden’s New IDR plan will be partially available on July 30, 2023. The undergraduate 5% of income provision won't be available until July 2024. We will come out with a lot of updates on this new plan, so if you’re not already, make sure to subscribe to our weekly update.
Borrowers who planned to pay off their loans and refinance before March 2020 would likely want to apply in late 2023 once student loan interest has actually started again.
And finally, if you want expert help from one of our CFP®, CFA, and CSLP® student loan consultants to take advantage of the limited time IDR Waiver, book an hour consult with the link below. For professionals with six figures of student debt, we could very likely find savings that equate to multiples of our consult fee.
What do you think of Biden’s student loan plan? Let us know in the comments.
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Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
Hi Travis,
Do you think this plan will include Parent Plus Loans? Also, is there any chance Biden will raise the Poverty Level…that will help with “discretionary income.”
I suppose it’s too much to hope that he would choose Elizabeth Warren as his VP….?
Thanks for the insight!
3 Big Questions:
1. For borrowers earning under $125,000, Biden would forgive any undergraduate debt taken out at a four year or two year public institution. —–>Is “only” the borrower’s income considered or borrower’s “and” borrower’s spouse (who does NOT have any student loan debt) combined income considered? I think it’s not fair to count spouse’s income.
2. Republicans will obviously resist his plan. Can he use Executive Order to put it into law immediately? What’s the point if Republicans will not make it work?
I was instructed by my student loan lender to file taxes separately from my husband so we did not have to include his income. I am half way through my student loan forgiveness program and would hope they don’t count income from my husband as we lose many deductions by filing our taxes separately. Therefore, it would not be fair to count his income now.
Does Biden plan on putting off student loan payments until September of 2021 ?
Right now, student loan payments will begin again in January. I think he’ll extend the payment freeze but won’t know for sure until he’s in office.
I have two daughters that attended a four year private college and I feel it is unfair that they would not receive the benefit of their student government loans to be forgiven. If I’m not mistaken, the amount of subsidized and unsubsidized government loans that a person may borrow are capped out at the same amount for everyone. It doesn’t matter if you go to a public or private college. My daughters chose to attend a private college so they could continue playing softball. Public universities don’t always fit everyone’s needs or wants. I say forgive or reduce everyone’s current student loan debt and then going forward institute the rule it has to be for a public university. At least you would know the qualifications ahead of time so you could make a decision prior to attending college. People who have already attended college can’t go back and change which university they attended. Regarding parent plus loans, why is the income limit only $125,000. To make it fair, base the income limit on a person’s zip code or raise the income limit. If you live in an area with a higher cost of living, then the allowable income limit should be higher. Just because you make more doesn’t always mean you’re in a position to be able to pay more.
@Terri — The different is not whether you went to a Private School or Public School, the difference is if you took out a Private Loan (e.g., SoFi, Bank, SallieMae, Earnest, etc.) when you went through schooling. So if you daughters took out a Federally-backed Loan, even while at a private institution, then they would be eligible. Hope that makes sense.
false. If you went to a private school you pay your own student loans and the loans of people who went to public schools.
How exactly do you pay someone else’s loans… really? Tired of people thinking that your taxes pay everyone’s bills or that you are the only one paying taxes… get a grip. You pay your OWN loans… period…
I’ve got 100k in parent plus loans for my son at a private college. Now that he graduated they want $1200 a month from me. I’m going to be homeless ..and according to all of this I will get no assistance.
We help parents with Parent Plus loans all the time. I recommend you reach out to a consultant to discuss your options.
Is that seriously the truth….Parent Plus Loans will fall into a loan forgivness program? I have 3 children all in college and without my taken out Parent Plus Loans, none of them would have been able to attend the colleges and programs they are currently enrolled. I am a single mom and have asked a million questions to everyone I could possibly ask and have scoured google and have not come up with any concrete answers?
Yes, that’s the truth. Parent Plus loans can qualify for PSLF. There’s a double consolidation loophole that you can take advantage of. Our consultant Meagan wrote about it here: https://www.studentloanplanner.com/parent-plus-double-consolidation/ I also recommend you book a consult to help you navigate it to save the most money. (I was a single mom for a long time and know how important it is to save where you can.)
Travis, great article. Thanks. Your example is law school debt (which is graduate loans) but then you say that is somewhat unclear as to what Biden will do with graduate loans. Has Biden made any statements recently or been in an interview or are there news articles that talk more about graduate loans under the Biden plan? I’m very curious in this topic and didn’t know his stump speech had changed Tom”undergraduate” only language. Sad to hear that.
Unfortunately, Biden’s student loan plan hasn’t been in the news lately. If we hear something, you can be sure Travis will send out an email.
Hi there, is there any clarity on how Parent Plus loans are treated under this plan? Thanks!
They’re not really covered at all. Same system as today
Thanks!
I taught for 3 years in public school from 2016-2019. I am no longer teaching and took out my earnings from my TRS to pay off other debts. I am leaving my student loan debt last to be paid off so the $10,000 forgiveness for public servants would be helpful. Do you know if my years of service count?
Right now, Biden’s $10,000 forgiveness is just an idea. We won’t know the details or if your years of service will count until the plan goes through Congress. If it does, Travis will be sure to keep you updated as things progress.
3. Massively reduce income-driven payments
For borrowers who earn more than $25,000, you would pay 5% of your discretionary income.
(It’s 5% of your discretionary income “over” $25,000. So if your discretionary income is for example, $50,000….then you would be paying 5% of $25,000, not $50,000)
Can anyone answer my question on whether you have to count your spouse’s income when calculating discretionary income? (Spouse does not have any federal student loan.)
It depends on the payment plan you choose and whether you file your taxes jointly or separately. If you’re on an income-driven repayment plan and file separately, only your income is used to calculate your monthly payment. The exception is the REPAYE Plan, which uses the combined income of you and your spouse regardless of whether you file jointly or separately.
Thanks Amy. Can you please clarify if I’m understanding below correctly?
For borrowers who earn more than $25,000, you would pay 5% of your discretionary income.
(It’s 5% of your discretionary income “over” $25,000. So if your discretionary income is for example, $50,000….then you would be paying 5% of $25,000, not $50,000)
That’s a great question – I suspect it would be 5% of your discretionary income “over” $25,000 like you said, though I haven’t seen it in black and white yet.
Thanks Amy. This is actually mentioned on joebiden.com
Does it strike anyone ELSE as needlessly complicated to have all these formulas to figure out whether or not you might have to pay 5% above $25k or 5% total, and the other stuff added on top like whether you went to a certain school or if you do community service, etc?
When Joe Biden could just say “No more student debt, no more student loan interest” and EVERYONE benefits, regardless of income or debt level? This tendency of Democrats to tie things to income level is a pathology. Do the thing or don’t do the thing. Making it increasingly complicated to figure out who qualifies just means fewer people will benefit.
Does anyone know what the $125,000 cut of is based on? Is it gross income, or adjusted gross income or taxable income? I’m right on the edge and i’m trying to see if I can do anything to ensure I don’t hit $126,000 and exclude myself.
Thanks!
I’m not 100% sure but I assume it’s AGI (Adjusted Gross Income)
$125,000 income cutoff should only pertain to the actual person with the student loan & not the spouse (who doesn’t have the loan)
Also does this apply to 2021/2020 year or 2022?
Hi James,
We are still waiting the official FAQ for this is, but based on what we know it will be the most recent income information that the Department of Education has. For most that will be 2021 information, unless you have recertified your income recently. Hope this helps.
Hi there,
I am a public school teacher in WA state. I have been teaching full time in an elementary school for 6 years now. I have a small loan amount from my bachelors degree to pay off.. around $15,000. But when I decided to become a teacher I earned my masters degree, I have around $60,000 in debt from earning my masters in teaching. Would I not be eligible for forgiveness because my debt comes from a graduate degree not undergraduate degree? That seems like a terrible clause in his plan, considering teachers are encouraged to earn their masters in order to be more highly qualified educators. Any insight here is much appreciated! Thank you ~Alycia
That depends on what the plan looks like after it gets through Congress. I’m sure it will undergo many changes before going into affect.
Hello. I took out nearly $60,000 worth of student loans for my undergraduate career. I went to an all women’s college. Would I then receive no relief? I think it’s unfair since my loans are not private and they’re housed under the Department of Education. Please help, thank you!
The details would have to be worked out and will likely go through many revisions before becoming active. Whether you’d receive relief remains to be seen.
I have federal loans through a private MSI college which sounds like would be included. I am very close to the 125 mark with my merit and bonus, and am wondering if this is based on AGI, or if it is impacted differently if I file jointly normally with my husband. Would it be solely my income from my taxes? How would they figure this out?
Will Biden’s student loan forgiveness plan apply to broke parents with federally backed parent plus loans??
-10k would be AWESOME!
It could, but what the plan looks like once it passes through Congress could be very different than what he proposes.
I am ready to retire in 5 years with a parents plus loan 80000 I work for nonprofit hospital will my loan be forgiven
Forgiveness depends on many factors. I’d recommend you book a consult with one of our consultants to discuss your options.
THis is distressing, as the word “undergraduate” appears WAY too often in these proposed plans. My debt is all from grad school at a private institution – once again, as usual, my governemnt has NOTHING for me but a kick in the seat of the pants.
I’m curious, I read something about none of the options include Parent Plus loans however through the Executive Order due to Pandemic it has stopped Parent Plus Loans until 12.31.2020. Why wouldn’t any of these scenarios as “Subsidized/Unsubsidized Student Loans” apply? Thank you.
The Income repayment plan for Parent PLUS loans are at 20% .
Do you know if Biden has any plans to include these loans in his plan?
If Biden forgives $10,000 of federal loans for all borrowers, will the loans be Direct and Education Department owned FFEL loans only or will FFEL loans owned by commercial lenders also be included?
It’s unlikely FFEL loans held by commercial lenders will be included but we won’t know for sure until we see a proposed bill come through.
This was my question exactly. My federal student loan is held by AES, so I was shut out of help from the CARES act. If $10,000 per borrower were to be forgiven, what are the chances everyone would be included? Is there anything to do to change a loan held by AES to one held by the Dept of Education to benefit, if such relief were to happen?
It’s unlikely that $10k per borrower will be forgiven. You might be able to consolidate your loans into a direct loan serviced by the Dept of Ed, but it’s best to talk with one of our student loan planners before doing that. It could have a negative effect, depending on your situation.
Mine are also held by AES and I could *really* use some support!
This is so depressing – I have graduate loans from a private college and I see nothing here that will give me any relief.
So nothing for Private Student Loans? I just refinanced my federal loans last year (from 7.99% to 3.112%) and this makes me very upset
WHy is there nothing for graduate students from private colleges?
So me and my girlfriend are graduating soon. We both have graduate federal student loans of about 500k each. With such a high loan principal and not big enough starting salary we are interested in the income driven repayment plans mostly the PAYE because it is forgiven after 20 years as opposed to REPAYE. We are planning on getting married after graduation. My question is, it should not be a problem to file taxes jointly since we both have to pay 10% of our income anyways and might as well benefit from the tax benefits of filling jointly, correct? Also, it would be a dream if we don’t have to pay taxes on the forgiven Loan after 20 years!! How likely is this to pass??
I am a parent with a $68K parent PLUS loan for my son with a rate of average 7%. I was planning to consolidate or refinance with a much lower rate with SoFi. Should I wait and start paying PLUS if Biden forgiveness will possibly apply to Federal PLUS loans or refinance by January 2021?
Take a look at the Parent PLUS double consolidation loophole: https://www.studentloanplanner.com/parent-plus-double-consolidation/ You should watch the accompanying video in that article to see how it works. If this is too confusing or you aren’t sure if it applies to your situation, we can walk you through it if you decide to book a consult: studentloanplanner.com/book
I appreciate your response. My main question is if president Biden’s loan forgiveness will apply to any Federal Loan including Parent Plus loans or just the students? Thanks again in advance.
My servicer, Nelnet, told me if I consolidate my loans through the government, as I work for a non-profit, some of my parent plus loans would be forgiven. I may have to file my taxes separately from my husband, though, as all the loans are in my name alone. Is this true? Can anyone help with this?
Parent Plus loans can be forgiven, but it’s a tricky process. Take a look at the Parent PLUS double consolidation loophole: https://www.studentloanplanner.com/parent-plus-double-consolidation/ You should watch the accompanying video in that article to see how it works. If this is too confusing, we can walk you through it if you decide to book a consult at studentloanplanner.com/book
Personally I was told to sit tight to see for how long Biden is going to extend the 0%. Right now it’s extended and other things are priority. (COVID).
I picked up a side gig that has been a blessing to make up for what I’ve lost in my serving job. Enuf to help me pay my payments on my PP loan for my daughter. I can actually SEE My balance is going down.
Anyway. I was told sit tight and don’t refi until we all see what comes down. It’s extended for now (no end date has been given) so buy down what you can at the 0% til then. Then make that decision.
Do you know for certain that any action by President Elect Biden will only benefit those with student loans taken out for undergraduate degrees? It seems there is a presumption that those who have loan debt from graduate degrees don’t experience financial hardship or job loss. Some have significant federal student loan debt they have difficulty paying off due to financial hardship, job loss, etc. People with graduate degrees lose jobs as well. Not everyone with a graduate degree is wealthy. Not everyone with a graduate degree has found a job making $100,000 or more per year despite trying to do so.
Right now, nothing is certain about Biden’s student loan plan. We’ll have to wait and see what happens when he takes office.
Thanks for this article. I’ve got two follow-up questions:
1.) I have worked for several years with a few agencies in the federal government.
How will this affect those who have already enrolled in the current Public Service Loan Forgiveness Plan? Will they be grandfathered in that plan, or will they be converted to the new plan (if passed)?
2.) I have good to excellent credit and make all my payments on time, yet I have trouble refinancing anything because my debt-to-income ratio is too high. This is obviously a catch-22, because the reason my DTI ratio is high is because of my student loans. (I have financed 4 degree programs, largely with federal loans.) Any advice for someone in my shoes?
It’s tough to say right now. When Biden takes office, more details are sure to come.
I would be so grateful for this forgiveness of student loans. I have a masters degree and one year of law school and still ended up teaching at a high school where I barely make ends meet. COVID hit and it was one of the only jobs I could get. I am so discouraged and want so badly to see a way out and I just don’t. With interest, I owe $160,000. I will never be out of debt or able to purchase a home. Do you Biden’s plan will forgive the entire amount if I work in public service for 10 years?
Plenty of borrowers are able to purchase a home while managing their student loan debt. I highly recommend reaching out to one of our consultants to book a time to get a custom repayment plan.
I’m confused, Travis stated he recommends “you’ll want to start refinancing federal loans once it becomes clear Biden will not further extend the zero interest policy that has been in place during the pandemic”. So if I refinance with a private lender, wouldn’t that make me ineligible for any of this potential relief if they are no longer federally owned? Am I misunderstanding?
If refinancing to a private loan is part of your repayment strategy, it’s best to start the refinancing process of your federal loans once Biden makes it clear he won’t extend the zero interest. If it’s better to keep your federal loans and take advantage of income-driven repayment, then you should stick with that. Hope that helps!
Hey guys,
I’m a pharmacist pursuing PSLF. I’m lucky to have a position working 8-5 Monday through Friday. I want to do my part and help out during the pandemic by giving vaccinations on the weekends. I’m concerned by doing so I will increase my income to a point where it will cost me more by trying to help by increasing my income and thus will have to pay more next year based on this years increased income. My questions are: Is it possible for me to dive in on the weekends to help give vaccinations or will it cost me more in the long run (as someone in health care I will always put my patients first and am wondering if there is a way for me to help while maintaining my financial situation for my family while helping the greater good). When should I submit my certification of employment if I plan to only do this on the weekend when needed (hopefully only 6ish months this year maybe less depending on how vaccine rollout goes?)
It’s hard to say without taking a deep look at your situation and analyzing your loans. I understand the frustration. You could use our repayment calculator to estimate what your payments might be if your income went up.
Hello there, thanks for the article!
It seems the information coming out I have seen on PSLF is inconsistent. Many places are reporting that Biden would be completely swapping out the existing PSLF program for the 10k/year over 5 years, which essentially caps forgiveness at 50k.
However, I have also seen other places, including here, that it would be IN ADDITION to improving upon the already existing federal statute for complete forgiveness for PSLF, by forgiving half after the first 5 years and then the rest after the next 5.
Can I ask how confident you are that Biden would not be completely replacing the existing PSLF and capping at 50k? It would be fairly devastating to me as I enter year 9 with nothing yet forgiven if suddenly the program was changed to cap me at 50k. I would have made numerous different life choices. I’m positive I qualify, as well, so nothing to worry about there.
Thanks again for the great article!
It’s very unlikely that the PSLF program would cease to exist for borrowers currently enrolled in and taking advantage of the program.
So will FFEL joint consolidated loans backed by the Ed Dept but serviced by Navient be considered for any forgiveness as we had no say when they changed the rules? Can’t consolidate to a Direct loan because it already a consolidated loan and joint loan.
So I have less than $10k in from a public university in graduate student loans. I’m a little confused, would that be forgiven under this new plan?
It’s really too soon to tell. Possibly? Although Travis has said he doesn’t think student loan cancelation will happen at all, so we’ll have to wait and see.
I still owe $25,000 in student loans for my masters program. I have been paying it for 19 years. Will any loan forgiveness apply to my status. I am also a city teacher in a public school.
I am paying off an old graduate student loan via FFEL, which were funded by private banks but applied through FSAID and guaranteed by Federal govt. I had several subsidized and unsubsidized loans for each year of grad school and I consolidated into a FFEL consolidated loan at a competitively low interest rates. My loan predates the current Direct Loans program of 2010. Since our loans are not owned by Dept of Education, would any of these possible routes to loan forgiveness apply to pre 2010 FFEL loans. I have been in an IBR repayment program 11 years. At my current track I have 14 more years to go and would then have to pay taxes on the large forgiven amount. I will well into retirement age by then and this has me very concerned. I have read that privately owned FFELP loans constitute the largest amount of debt and people in debt, but most of these plans seem to only apply to undergrad, public institutions, or loans owned by DOE. HOw could releif not apply to the largest owners of debt? Thank you.
You have options. It’s possible to convert an FFEL loan to the new Direct Loans program, but it’s a strategic move. I’d recommend you reach out to a consultant to discuss a custom plan.
Thank you. I discussed this with my servicer. What they didn’t mention, which I later read on FSAID website, can only convert FELP to Direct Loan as a consolidation loan but you would need more than one loan for a consolidation application, with the exception of people in Military service and those expanding on the Public Service loan. So my one consolidated FFELP loan would not qualify to apply to Direct Loan. Secondly, even if it did, and i was accepted, I lose my 11 years credit under a 25 year IBR plan and would start the clock back at zero and the clock on 25 years start again. Not hyperbole, but I will most likely be dead by then.
I am in the exact same position as you are. I graduated college in 1997 and my loans are FFEL. We are part of the millions of borrowers left out of the Dept of Education taking over our loans. I would also lose 7 years of qualifying loan forgiveness payments to consolidate my loans to Direct Loans. I feel helpless and frustrated as I was never swayed to consolidate my loan to a Direct Loan when I entered the IBR repayment plan. We were left out of the CARES Act and I am afraid that any loan forgiveness in this administration will be solely for Direct Loans as well. In other words, no matter what we do we are screwed. Had I known I would not have any benefits of a Direct Loan, I would have re-consolidated my loans years ago.
Well, since government backed private banks were involved with FFEL, I can only assume our “representatives” will not lift a finger to forgive any of those FFEL.
Wendy, if you’re still following: you can consolidate under a US federal government loan which WILL qualify for forgiveness, if you don’t want to wait for Congress to get around to figuring out if you’re worthy to have your debt forgiven. I just put in the application to do mine. It takes at least a few weeks once you’re approved — I’m still waiting for the process to complete — and so you should keep making payments. But if you qualify, and you want to spend 20-30 minutes filling out the forms, I’d highly encourage you to do so.
Yes -I too have Federally backed loans. Per Navient, they are not eligible for any of the gov’t assistance-they say because they were sold to them and they are private. I’ve been paying for many many years-sadly in the beginning, I think many of my payments didn’t credit correctly. It wasn’t until Navient took over the loans that I’ve seen the balances change. If there was no such thing as a direct loan, we shouldn’t be penalized!
Hi Patty – You’re right. Unfortunately, the communication just wasn’t there so many borrowers were left in the dark. There are things to do, though, and it’s something we analyze during our consult service if you’re interested. No pressure, just thought I’d mention it as an option.
I received a unsubsidized loan for the amount of $7000. Can that be forgiven by Biden’s $10,000 loan forgiveness as of today?
President Biden hasn’t authorized $10k of loan forgiveness, so there’s no way to know who could benefit if it passes.
I too am someone that had FFEL loans (from 2000) prior to the Direct loans being common. I went through some major financial hardships in between 2007 and 2014 and my loan servicer at the time was Navient. When I reached asking for assistance they kept on insisting my only option was a forbearance (with interest still accruing) and when I asked if I was in a loan set up for PSLF (my employer is a qualified 501c3) I was told that any payments I was making was counting toward the PSLF program. It wasn’t until 2016 when I asked for a total of qualifying payments I had made towards PSLF, and after a lot of escalating, did I found out my loan program didn’t qualify (still FFEL) so none of the payments I had made counted. They then told me I just needed to consolidate to a Direct Loan servicer to get my loan to qualify, BUT they never indicated that I would not get credit for any of the payments I made previously! I just found out a little over a year ago that it was like I was starting over with my payments and none of them made before the “consolidation” counted. Now I am looking at a loan balance almost double (with all the interest accrued during forbearances and the high interest rate) another five years of payments. I feel very defrauded by Navient and I have no recourse. In addition this article seems to indicate it is highly unlikely the PSLF program will get expanded such that I can get any of my FFEL payments counted toward PSLF. Would the expansion of 50% after 5 years or the other program of $10k a year for five years be retro, or only going forward?
Hey Natalie, our consultant Meagan has this to say:
So sorry for this situation. Make sure all boxes are being checking for PSLF eligibility now: To sign up for PSLF/update your payment count, complete the online PSLF Help Tool here and take this auto-filled Employer Certification Form (ECF) to your current employer for their signature. Then upload the complete ECF to Fedloan’s Portal/Mail to Fedloan. Here’s tips on how to complete this accurately: Become a PSLF Help Tool Ninja.
Recertify income & submit a new ECF every year on time and also check that your credits are being counted appropriately.
Remember: To be eligible for PSLF you need to: 1. Have Direct Loans. 2. Be on an Income-Driven Plan. 3. Work full-time for a qualified employer 4. Make 120 qualifying payments.
As far as new future relief or updates to the student loan repayment system for PSLF, no way to know at this point in time if it would be retroactive. Nothing has been confirmed or decided on yet.
I have FFEL loans though Nelnet and am wondering if it’s too late to apply for consolidation to a direct loan to qualify for the cancellation just announced.
Hi Michelle,
Currently We don’t know yet if FFEL private loans can be consolidated to count, and are awaiting clues and formal guidance regarding this. I hope this information helps a bit.
Hello,
Is it clear yet whether PSLF program participants could apply for Biden’s new IDR plan to reduce payments from 10% of income to 5% while still qualifying for the program? Or is this a totally new program?
Hi Nicole,
This reduced payment from 10% to 5% is an update to the current IDR program and not a completely new program. The reduced payments from 10% to 5% will apply to those under income driven repayment (IDR) plans. In order to be a part of the PSLF program you have to be on an IDR plan, therefore this reduced payment also applies to those under PSLF. I hope this information helps.
Why are there comments in here from 2021 on an article written 8/24/2022?
Are they relevant?
Hi Greg,
the article was actually first written when the Biden Administration first announced the possibility for loan cancellation and forgiveness and since then has been periodically updated to reflect any changes or updates we have received since then with the most recent update being 8/24/22. Some of the comments may be relevant, but I would definitely stick to the information that is directly in the article because that will be the most current information we have regarding this.
“Borrowers’ remaining debt is typically canceled once they make 20 years of monthly payments. But the White House is proposing cutting that in half as well, to 10 years, for borrowers with original loan balances of $12,000 or less.”
Does anyone know if this is original balances per loan? Or aggregate? So if I took out $12,000 each year for 4 years for a total balance when I graduated of $48,000, would each loan be eligible to be forgiven after 10 years or would no e, because the total of all loans is over $12,000?
Hi Eric,
At the moment we are still waiting for the official FAQ and guidelines regarding this. Stay tuned, we will update once we know more.
I’m considering consolidating my federal loans (grad and undergrad, all held by Nelnet) in order to take advantage of PSLF. My loans would be consolidated with MOHELA. Do we know if such a direct consolidation will still be eligible for the $10,000 cancellation? It seems like grad vs undergrad loans are treated differently under this $10k cancellation, so I’m worried that none of them will be eligible if I do the PSLF consolidation. Thank you for any advice!
Hi Alex,
Right now all the facts for Biden’s $10k forgiveness are not out but in theory consolidation should not affect the $10k at all – it is based on loan type and AGI. Many people have consolidated loans and are in the PSLF program and will receive the $10k. If you are concerned wait until all the information is available. If you need to submit the PSLF waiver – I wouldn’t wait, that is important to get in by 10/31./22. If you have more questions, I recommend a consult with our loan experts.
Will the qualifications for PAYE and REPAYE change at all in the Biden Plan? Unfortunately, I have one loan accounting for less than 1% of my total borrowed amount that precedes 2007 and disqualifies me from PAYE. That leaves me stuck in REPAYE where the marriage penalty has forced my partner and I to choose between have the protections of a legal marriage and keeping our house. I was hoping the reforms would address this, but it looks they didn’t even give it consideration. I really don’t understand why they can’t simplify ALL the plans and treat all borrowers fairly. What is standing in the way of that?
Hi Ryan,
At the moment we don’t know yet but expect to have a lot of updates in the coming months on our email list. Keep in mind nothing changes regardless until July 2023. Hope this helps.
Hello! Just curious if the new Biden Administration forgiveness that applies to married households is worth $10k (or $20k) per household? Or would that amount apply per spouse?
Hello Blake,
Loan Cancellation is per person, but they will most likely use your joint income if you file married jointly for taxes. We are still waiting for the official FAQ and guidance regarding this. Stay tuned!
With the newest August 2022 announcements, I’m wondering if we have any idea if someone switching from PAYE or another existing plan to the Biden IDR plan would trigger recapitalization or restart the standard forgiveness timeline? (I am thinking with a large student loan sum that is negatively amortizing, the tax bomb for those pursing standard forgiveness could be substantially less with the Biden plan)
A big question is, for people that consolidated everything into direct loans (undergrad and graduate) are they actually going to figure out for a gazillion people the break down vs 5 or 10% income repayment, or just apply one or the other?
Hi Dan,
We are currently awaiting formal guidance and FAQs regarding this, but it is possible that graduate borrowers could pay a weighted average depending on their mix of undergraduate and graduate debt. Stay tuned for more updates.
For the $10k debt cancellation, the income limit is $125k for individual and $250k for married couples. I am married. And jointly with my spouse income is over $250k. However, my individual income is under $125k. Do I file my 2021 taxes as married separately to qualify for this $10k cancellation?
Hi Michael,
If you are filing separately your spouse’s income will most likely not be included, but we are still waiting on the official FAQ regarding all the new changes. We definitely recommend staying tuned for when we get more updates regarding this.
My student loans where wrapped into bankruptcy I filed in 2020. 11k worth of debt. Will I be eligible to have forgiveness for these loans?
Hi Kendra,
I am so sorry to hear about your situation. Unfortunately at this moment, we have not received official guidance and FAQ regarding the cancellation. Therefore, can’t say for certain if your loans would qualify or not. We will continue to provide updates once we know more. Stay tuned.
Will the forgiveness be based on AGI or Complete Income?
Hi KD,
We currently do not know. No official guidance has been provided for this. Stay tuned and we will update as soon as we have more information.
Hi, I have a few questions:
1. Are Direct Parent PLUS loans eligible for Biden’s $10,000 aggregate forgiveness, even if they haven’t been consolidated?
2. If the child that received the education paid by the Parent PLUS loans also received Pell Grants, does the Parent PLUS loan borrower get $20,000 forgiven off their Parent PLUS loan balance (even if the parent did NOT receive Pell Grants when they attended college decades ago)?
3. The article states that “only loans taken out before July 1, 2022, are eligible.” If one has only Parent PLUS loans (some Direct and some FFEL) and they were to take advantage of the Double Consolidation Loophole, would that final consolidation loan remain eligible for the Biden forgiveness plan even though that consolidation loan is issued AFTER July 1, 2022 (the original Parent PLUS loans were issued between 2006-2008)?
Thanks,
Andy
Hi Andy,
1. Yes parent plus loans do qualify even if they are not consolidated.
2. We have not received any official guidance or FAQ’s regarding this, but the likely scenario is that only the Pell Grant recipient will qualify for the $20,000 forgiveness.
3. Based on the current information we have FFEL Loans do not qualify for Biden’s forgiveness, but we don’t know yet if FFEL private loans can be consolidated to count, and are awaiting clues and formal guidance regarding this.
Hope this information helps and stay tuned for more updates.