What does President Joe Biden’s plan for student loans mean for student loan forgiveness, student debt cancellation and college affordability?
We expect improvement of the PSLF program, faster discharge of student loans taken out from fraudulent for-profit colleges, large increases in Pell grants, and narrowly targeted student debt cancellation.
It’s possible we could also see income-driven repayment programs become more generous, particularly for those with undergraduate student debt only.
So far, President Biden has extended the COVID forbearance on federal student loan payments and interest first until September 30, 2021, and then one final extension until August 31, 2022. Whether the payment pause will be extended again is still TBD.
The Democratic Congress passed the American Recovery Plan (ARP) in March 2021, eliminating income taxes on forgiven or canceled federal and private student loans until December 31, 2025. This could create a precedent for permanently eliminating taxes on student loan debt forgiveness.
In August 2021, Education Secretary Miguel Cardona announced $5.8 billion in student loan discharges for over 323,000 borrowers with a total and permanent disability.
However, the outline for Biden’s $3.5 trillion healthcare and education plan seemed to exclude major student loan initiatives. This suggests most changes to student loans will have to be accomplished by executive orders from this point on. But some notable student loan programs right now include the PSLF waiver and IDR waiver.
In this post, we’ll show you the seven key planks of the Biden student loan plan and rate each part on how likely we think it will pass by 2024, given Democratic control of Congress until January 2023.
1. Expand student loan forgiveness programs
The first part of the Biden student loan forgiveness agenda is to expand student loan forgiveness programs like Public Service Loan Forgiveness (PSLF) through the U.S. Department of Education.
Biden supports the What You Can Do for Your Country Act. This bill would dramatically expand the Public Service Loan Forgiveness Program (PSLF), which forgives student loans for public servants after 10 years of income-driven qualifying payments, tax-free.
The bill would allow for 50% forgiveness after five years, enable federal student loan borrowers with non-qualifying loans to receive forgiveness and grow the pool of eligible employers.
Biden also supports a new forgiveness program that would forgive up to $10,000 per year for up to five years of national or community service. That’s in response to criticisms that the current PSLF program does not help forgive the student loans of public servants who owe smaller balances.
The average federal student loan debt that is forgiven with PSLF is approximately $97,220 as of May 2022, which is much higher than the overall average of about $35,000.
Biden will most likely streamline and improve the PSLF application process, some of which would have happened anyway due to how the program was structured.
Rating: Expect PSLF improvements and strengthening of the program. If a new generous PSLF type program is created, expect it to benefit primarily borrowers with five-figure balances such as nurses and firefighters. Current borrowers pursuing PSLF will be unaffected. Borrowers yet to take out student loans will likely still have access to the PSLF program for years to come. There’s still a chance we could see borrowers with older loans such as FFEL receive credit for past payments, particularly those who have FFEL loans owned by the Department of Education.
2. Allow bankruptcy discharge
When President Biden was Senator Biden, he represented the state of Delaware, which is famous for having a large number of credit card and financial companies.
He voted to reduce bankruptcy protections for borrowers and helped contribute to the current state of affairs, where private and federal student loans are the most difficult debt to discharge in a bankruptcy court.
However, as part of the Obama administration, he supported a bill to restore the ability to discharge private student debt in bankruptcy, even though it did not pass. That shows Biden’s pragmatism and his willingness to support the interests of the constituency he represents.
The current process to discharge student loans depends on where you live, who your lender is and whether they sue you within a statute of limitations, among other considerations.
Allowing bankruptcy discharge would likely bring relief to many struggling borrowers by expanding eligibility. It may or may not raise borrowing costs significantly for those who take out private student loans.
Rating: Highly likely to get brought up prior to 2024. There was recently a bipartisan bill introduced to make schools share the risk of borrowers defaulting. Relaxing the bankruptcy rules for student loans has bipartisan support, so we think there is a real chance we’ll see movement on this issue.
3. Reduce income-driven monthly payments
If you earn less than $25,000, Biden has proposed that you would pay nothing on your undergraduate loans and accrue no interest.
For borrowers who earn more than $25,000, you would pay 5% of your discretionary income.
In my analysis, this is the most expensive plank in the Biden student loan plan.
Biden has consistently stated his desire to “halve student loan payments for undergraduates.” He mentions cutting the payment in half because the current IDR plans — PAYE and REPAYE plans — require 10% of income.
President Biden might be able to accomplish this through the negotiated rulemaking process his administration recently began. This could allow him to change or simplify existing income-driven repayment programs. That said, we would anticipate that a new option could be offered, and borrowers could choose to stick with their current plan or change to the new one.
Another change that might happen is an increase in the deduction for income-driven repayment. For example, currently, discretionary income determines student loan IDR payments. Discretionary income is your AGI minus 150% of the poverty line. Democrats might try to increase that deduction to 300% of the poverty line for lower-income borrowers while compromising with Republicans to not lower the percent of income a borrower must pay.
Rating: Borrowers with graduate degrees should expect to continue to pay 10% of their income. It’s possible that borrowers will only have to pay 5% of their income on undergraduate debt, but less likely than other proposals.
4. Increase Pell Grants and make public college free
Most Democratic Presidential candidates wanted to double Pell Grant funding. Moderate Republican Senators might support this to some degree as well.
Biden supports making all four-year public universities tuition-free and offering free community college. This will get strong Republican opposition and possibly even some opposition from moderate House Democrats as well. We think this plank of Biden’s platform would have to get addressed in the upcoming $3.5 trillion reconciliation bill, if it’s addressed at all.
Rating: We expect increases in Pell grants, given the reconciliation bill. That said, the Pell grant limit increase will likely not be doubled. It will be something more moderate than that.
5. Eliminate taxes on forgiven student loans
Senate Democrats successfully included this provision in Sec. 9675 of the American Recovery Plan.
Student loan forgiveness is now tax-free until the end of 2025. This policy is not permanent, though. We would need to see complete Democratic control after the 2024 elections for it to be extended.
Hence, nothing has changed for borrowers expecting loan cancellation/forgiveness in the 2030s or 2040s, except that a potential precedent has been created making tax-free forgiveness more likely.
For at least a few years, we’ve advised our thousands of student loan planning clients to plan as if they will owe their tax bomb but to expect that it won’t actually happen when trying to decide if they should refinance or not.
Rating: Enacted. However, this change-making student loan forgiveness tax-free is temporary, not permanent, as Democrats in Congress had to work within the confines of the reconciliation process. We expect it will be extended in 2025 if Democrats win Congress and the White House in 2024. However, it could potentially go away in 2025 if Republicans control either of these levers of power after 2024. It’s likely, though, that this creates a precedent that will be extended.
6. Forgive undergraduate student loan debt for public college tuition costs
For borrowers earning less than $125,000, Biden’s student loan plan would forgive any undergraduate debt taken out at a four-year or two-year public institution.
Why limit this forgiveness to public institutions? Because it costs less while still having a big impact on many borrowers.
Biden wants the federal government to make payments for borrowers until the loans are forgiven. The income test would likely be yearly instead of having all the debt forgiven at once. That way, you wouldn’t encourage borrowers to minimize their income in a specific year.
Note that undergraduate loans he’s talking about likely only include Stafford loans, which are limited to no more than $57,500 for four years of undergrad. Most borrowers at public colleges borrow much less than this.
Also, many of our clients at Student Loan Planner® go on to pursue additional education and take on graduate student debt. Their payments are income-driven, which means their payments are no different if they had their undergraduate debt forgiven. Would Biden still require these borrowers to make payments? Likely.
President Biden claims this forgiveness will be financed by repealing the excess business losses tax cut. Even with a Democratic Senate, that would be a tough task.
This forgiveness would likely cost hundreds of billions of dollars, and this tax cut would not cover the cost of widespread forgiveness.
Rating: Highly unlikely, as this proposal’s cost in the hundreds of billions of dollars, would compete with other policy priorities of a Biden administration, like supporting the economy, providing stimulus checks, and making investments in healthcare and clean energy. With tax increases reported to be on the table already, President Biden will likely use this tax revenue for other purposes, and we expect his focus will be on fulfilling some type of cancellation that he can do without legislation.
7. Cancel $10,000 of student debt for all borrowers
President Biden supports canceling $10,000 of student loans for all borrowers, although only through the legislative process. He’s rejected Senate Majority Leader Chuck Schumer’s proposal (which is also supported by Elizabeth Warren) to cancel $50,000 via executive order or even $10,000 via executive order. Speaker Nancy Pelosi has said that President Biden cannot cancel debt via an executive action such as this. This makes broad student debt relief through cancellation increasingly unlikely.
There are provisions in the legal code governing student loans that allowed President Trump and his Secretary of Education to extend the period of 0% interest on student loans from September 30, 2020, to December 31, 2020, and then January 31, 2021, due to the national emergency declaration. President Biden extended this pause further to August 31, 2022.
Rating: Cancelling student debt was a major campaign pledge for President Biden. However, that pledge runs into the reality of not having enough money in the $3.5 trillion reconciliation bill to enact this pledge. With the executive order route most likely cutoff, we expect President Biden will cancel debt for more targeted groups of borrowers, such as the disabled, defrauded, or students in longer-term default.
Borrowers with modest incomes will likely get more attention under the Biden student loan plan
The Congressional Budget Office released a report in February 2020 that over $200 billion of student loans would be forgiven in the 2020s, with 81% of the benefit going to graduate and professional students.
That seems like forever ago because of the pandemic, but the report received a lot of attention among policymakers.
Because of how the current student loan system benefits those with high debt disproportionately, I’d expect strong momentum around helping borrowers with smaller balances and modest incomes.
Expect modest changes to student loans in 2021 and 2022
Biden’s student loan policy changes will likely continue the trends of the Obama administration while also reflecting the overall progressive political representation in the Democratic Party.
However, the last time we saw a massive change in student loans was during the financial crisis when Democrats enjoyed a supermajority of 60 Senators. The Senate is split 50-50 now, giving Vice President Kamala Harris the tiebreaking vote.
Narrow Democratic control of Congress will moderate what Biden can achieve on education policy, given that most changes now need to be accomplished through executive order.
Will Student Loans Be a Primary Focus of Biden? We’ll Have to Wait and See
Given the seriousness of the pandemic, President Biden might focus on other priorities such as the economy and healthcare while simply allowing student loans to begin again in August 2022.
Additionally, any changes to student loan repayment plans or forgiveness tend to take effect in July of the following year that a bill is passed. That means we could be waiting a while for any potential changes. In fact, it would be unlikely to see changes to the current system before July 2022 to give enough time for the executive and legislative branches to create a new policy.
Since the pandemic is the main focus, we could see some effort at cancellation in fall 2021, followed by a series of executive orders meant to improve student loan forgiveness and income-driven repayment.
Student loan refinancing is also likely going to continue under a Biden administration. You should be refinancing private loans right now, and you’ll want to start refinancing federal loans once you become worried about rising interest rates or when the interest freeze expires, whichever comes first.
Expect lots of talk about student loan changes until January 2023, when we may or may not have a different party controlling Congress.
Remember, though, the Republicans controlled the White House and Congress with bigger margins than the Democrats currently do in 2017. They tried to pass the Prosper Act, but it went nowhere because it didn’t have bipartisan support in the Senate.
Instead of focusing their legislative power on student loans, Republicans used the reconciliation process to target ACA repeal and cutting taxes. In other words, other policies were more important to them than reforming student loans. The same will probably be true for the Democrats.
Any big student loan changes will likely need to get the support of moderate Senators from both parties. So we might be in store for less change on student loans than you’d think from here until 2023.
What do you think of Biden’s student loan plan? Let us know in the comments.
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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)
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.