Joe Biden and Student Loan Forgiveness

Update, 8/24/2022: On August 24, 2022, President Biden announced his plan to forgive up to $10,000 in federal student loan debt and up to $20,000 for Pell Grant recipients. The debt forgiveness will be limited to borrowers with incomes of less than $125,000 a year or families earning less than $250,000. In addition, the Biden administration has extended the payment pause on federal student loans until December 31, 2022, with payments to resume in January 2023.

This announcement comes as part of a three-part plan from the Biden administration to provide targeted student debt relief, make federal student loans more manageable for borrowers, and reduce the cost of college.

For student loan borrowers with outstanding debt, hopes were high for President Joe Biden to forgive student loans. He proposed $10,000 in student loan forgiveness for all borrowers during his campaign, but some lobbyists and advocacy groups hoped he’d provide even more. 

Since Biden took office, there hasn’t been as much progress on student loan forgiveness measures as some borrowers hoped; for borrowers with more than the average amount of student loan debt, that’s concerning. 

However, the President has made some significant changes, and the potential for partial student loan forgiveness still exists. 

 Learn More: Why is college so expensive? 

Will Student Loans be Forgiven?  

When people think about loan forgiveness, they usually picture the government wiping out all outstanding student loans. However, any forgiveness measures will likely be more modest. And many borrowers don’t realize that many borrowers have had their loans forgiven already. Through very targeted efforts, the Biden administration has forgiven approximately $9.5 billion in federal student loans. Groups affected include: 

• Defrauded borrowers: For borrowers that were defrauded by for-profit colleges, Biden’s policies provided over $1 billion in federal student loan forgiveness. 
• Individuals with disabilities: In March 2021, the Education Department changed the requirements for Total and Permanent Disability Discharge, making it easier for borrowers with disabilities to qualify for loan discharges. 

In addition, President Biden extended the student loan relief measures that were put into place under the Coronavirus Aid, Relief and Economic Security (CARES) Act. He extended the payment forbearance period and interest waiver through August 31, 2022, helping millions of borrowers who otherwise would be in danger of missing student loan payments. 

Although it’s possible for the payment forbearance to be extended again, it’s unlikely. Borrowers should start preparing for student loan payments to resume rather than hold out for the potential of loan forgiveness. 

The impact of student loan debt on the economy is substantial, so many people — politicians, lobbyists, bankers, economists, and student loan borrowers — are keeping a close eye on student loan developments. The Biden administration had indicated that they’d announce their decision around loan forgiveness by the end of the summer, but that could change. 

Arguments For and Against Student Loan Forgiveness 

Why is President Biden taking so long to make a decision? Part of the problem is that experts are divided between the effect and the impact of student loan forgiveness on the economy.

Advocates for Loan Forgiveness

According to a survey from Politico, voters are clearly in favor of student loan forgiveness measures: 

• 71% of voters are in favor of partial or full student loan forgiveness; just 29% oppose it
• Only 19% of voters want debt wiped out for all borrowers, with others wanting limits on the amount of debt forgiven or restricting forgiveness to only some borrowers.

Advocates of student loan forgiveness believe that eliminating some or all student loan debt would have a positive impact on the economy:

• Homeownership: It may encourage more college graduates to become homeowners since they will have more cash flow.
• Entrepreneurship: Borrowers may be more likely to start businesses without the burden of student loan debt.
• Discretionary Spending: Not having to make payments every month may increase overall consumer spending. 

Opponents of Loan Forgiveness

Opponents of student loan forgiveness measures say that forgiveness wouldn’t have positive impacts; instead, it could negatively affect the economy in the following ways: 

• Taxpayer Cost: If the government were to forgive outstanding student loans, it would cost taxpayers billions. In fact, the Brookings Institute reported that even modest loan forgiveness proposals would cost more than school lunch programs or low-income energy assistance programs. 
• Benefits High-Income Borrowers: Those against loan forgiveness say any measures would primarily impact borrowers with high incomes since the average college graduate earns more than an individual with only a high school diploma. 
• Doesn’t Fix the Root Cause: Any forgiveness measures only impact student loans; it doesn’t address the root cause of the current loan crisis: skyrocketing college tuition. Opponents say forgiveness proposals should be tabled until rising college costs are curbed. 

Joe Biden Student Loan Forgiveness & Relief Timeline 

President Biden has taken some steps toward student loan forgiveness. Below is a breakdown of the steps taken so far: 

• 2020: As a presidential candidate, Biden proposed making changes to the student loan system. His proposals included $10,000 in loan forgiveness and making adjustments to Public Service Loan Forgiveness. 
• March 2021: A provision with the COVID-19 relief bill makes student loan forgiveness exempt from income taxes through 2025. 
• April 2021: President Biden asked Education Secretary Miguel Cardona to research the President’s authority to forgive student loans through executive action. 
• October 2021: Changes were made to Public Service Loan Forgiveness to temporarily expand it to additional borrowers that may have made payments under non-qualifying payment plans or loans — such as FFELP loans — that were previously ineligible. 
• April 2022: The Education Department announced that the federal payment freeze was extended through August 31, 2022. It also introduced a fresh start program for borrowers in default. 
• June 2022: The Education Department Approved $5.8 billion in student loan discharges for borrowers that attended Corinthian College. 

Important Information for Borrowers Who Qualify for Student Loan Forgiveness 

Although the widespread loan forgiveness that many borrowers hoped for hasn’t happened, the Biden administration has made significant efforts to provide relief to student loan borrowers. 

Some of those initiatives are automatic, providing student loan forgiveness to eligible borrowers and other forms of relief without the borrower having to complete any actions. But with others, borrowers must take steps by program deadlines to qualify. 

Automatic Student Loan Forgiveness Measures

The Biden administration instituted several changes that automatically impact borrowers. Affected groups include: 

• Borrowers in default: In April, the Biden administration announced that borrowers that defaulted on their loans will be given a second chance. When payments resume in September, accounts in default will be put into good standing, giving borrowers a fresh start. For borrowers in default, this is an opportunity to recover and rebuild their finances without worrying about wage garnishment or collection calls. 
• Borrowers with disabilities: The government expanded Total and Permanent Disability (TPD) Discharge to give additional relief to affected borrowers. Under the coronavirus-related measures, borrowers don’t have to re-certify their incomes during the emergency relief period. And if you had a loan discharged through TPD, but it was reinstated because you were unable to submit your income verification, your loan servicer will automatically revert your loan to its discharged status. 
• Borrowers enrolled in an income-driven repayment (IDR) plan: If you are enrolled in an IDR plan, the paused payments automatically count toward the required number of payments to qualify for loan forgiveness. Depending on which plan you’re on, your balance will be forgiven after 20 or 25 years of making payments. 
• Borrowers in public service: Borrowers that work for government agencies or non-profit organizations and pursuing Public Service Loan Forgiveness automatically benefit from the payment freeze. During the federal forbearance period, all paused payments count toward the required 120 monthly payments needed for loan forgiveness. 
• Defrauded borrowers: Borrowers that attended Corinthian Colleges qualify for full loan discharge. There’s no action needed; all loan discharges are automatic. 

Additional Action Needed to Qualify for Student Loan Forgiveness 

There are other loan forgiveness programs and changes that borrowers can use to get help with their loans. However, it’s important to take action now. Otherwise, you may not be able to take advantage of these initiatives. 

For a limited time, the government has expanded PSLF through the PSLF Temporary Expansion. Under this expansion, you may receive credit for the following: 

• Past periods of repayment on loans that wouldn’t qualify for PSLF, such as FFEL loans
• Payments made under a non-qualifying payment plan, such as graduated repayment
• Past periods of repayment whether or not you made payments on time
• Forbearance periods of 12 months consecutive or more, or 36 cumulative months or greater, will count under the expansion. 

However, to take advantage of this limited time waiver, you must consolidate your loans into the Direct Loan program with a Direct Consolidation Loan by October 31, 2022. You can apply for a Direct Consolidation Loan online. 

Who Would Benefit from Student Loan Forgiveness? 

There are millions of borrowers with federal student loan debt. But who would actually benefit from student loan forgiveness measures? 

In total, President Biden has authorized the cancellation of $25 billion of outstanding federal student loans. The majority of affected borrowers have been students that were defrauded by for-profit institutions, those with disabilities and individuals that work in public service. 

Future measures could benefit those groups even more, but it could also benefit other borrowers that are struggling to pay down their balances and need a helping hand. 

Should I Pay Off Student Loans During Forbearance? 

Future loan forgiveness initiatives from the Biden administration are only hypothetical at this point. But if they did happen, it would likely only cover a portion of your outstanding balance. And there may be restrictions on borrower income, so all borrowers may not qualify. It’s likely that you’ll be solely responsible for repaying the majority of your debt, so making payments during the payment freeze could be a good idea. 

Whether or not it makes sense to pay off your student loans during the federal forbearance period is dependent on your unique circumstances. 

With interest temporarily at 0%, your payments will go entirely toward your loan’s principal, helping you get out of debt faster and save money. However, paying off your loans right now may not be the best idea. 

If you have other forms of debt with higher interest rates — such as credit cards, personal loans, or car loans — it may make more sense to put any extra money you have toward those accounts rather than your loans. With your student loans, payments aren’t due and interest isn’t accruing, so this is an opportunity to get a handle on your other debt. 

5 Tips for Managing Student Loan Payments During Forbearance

Through August 31, 2022, federal student loan payments are paused, and interest is set at 0%. While the federal payment freeze is coming to an end, there are still a few weeks to take advantage of it before repayment resumes. 

To make the most of the remaining payment freeze, use these tips: 

1. Update your contact information: Your contact information — such as your mailing address, cell phone number, or email — may have changed since the payment freeze began in March 2020. If that’s the case, your loan servicers may have outdated information and be unable to reach you with details about your loans or payment dates. Log into your account and update your information for all of your existing loans. 
2. Enroll in autopay: To prevent missing payments, sign up for automatic payments. Federal student loan servicers give borrowers a 0.25% percentage point discount for enrolling in autopay, so it can also help you save money. 
3. Ask your employer for help: More employers are offering student loan repayment benefits than there were just a few years ago. Talk to your human resources department to see if your company provides this benefit to their employees and what you need to do to participate. By taking advantage of employer student loan assistance programs, you can save money and pay off your loans faster. 
4. Make extra payments: With student loan interest rates at 0% through August 31, 2022, you can pay off student loans faster by making extra payments now. When the interest rate is at 0%, any payment you make will go toward the loan principal rather than accrued interest, allowing you to save money and pay off student loans early. If you have multiple loans and aren’t sure which student loan to pay off first, put extra payments toward the account with the highest interest rate — you’ll save the most money with that strategy. 
5. Enroll in an IDR plan or recertify your income early: If your normal monthly payment is too high, talk to your loan servicer about alternative payment options. You may be eligible for an IDR plan which can reduce your monthly payment. And if you still have a loan balance at the end of your new loan term, the government will forgive the remainder. If you’re already enrolled in an IDR plan, you can re-certify your income-driven repayment plan early to potentially lower your payment if your circumstances have changed. 

Student Loan Forgiveness Alternatives 

While student loan forgiveness is still a possibility, it’s unlikely to wipe out your entire balance, and some borrowers may not be eligible for forgiveness. If you’re dealing with overwhelming student loan debt, use these tips to manage your loans: 

1. Consolidate FFELP Loans 

If you have older Federal Family Education Loan Program debt, you can still take advantage of the federal payment freeze — and any potential future forbearance extensions — by consolidating your loans with a federal Direct Consolidation Loan. Once you consolidate your student loan debt, you’ll have just one loan to manage going forward, and you may get access to additional payment plans. 

2. Enroll in an Income-Driven Repayment Plan

If you know you can’t afford the minimum payments on your loans once the federal payment freeze comes to an end, reach out to your loan servicer. You may be eligible for an alternative payment option like income-driven repayment (IDR) plans. IDR plans base your payments on a longer loan term and your discretionary income so that you could qualify for a significantly lower monthly payment. 

3. Contact Your Lender to Discuss Hardship Options

If you are dealing with financial difficulties due to losing a job or becoming ill, contact your loan servicer right away. You may be eligible for a general forbearance or economic hardship deferment that allows you to postpone your payments — even after the federal payment freeze ends. 

4. Refinance Your Student Loans

If you have high-interest loans — or a combination of federal and private student loans — another option is student loan refinancing. You could refinance your debt and qualify for a lower student loan interest rate, helping you save money and pay off your debt faster. 

Refinancing is beneficial if you have private student loans and are ineligible for loan forgiveness. 

Federal loan borrowers should be aware that refinancing their debt will transfer their loans to private lenders, and they’ll no longer be eligible for federal benefits. After refinancing, borrowers can’t enroll in IDR plans, qualify for general forbearance or take advantage of federal student loan forgiveness programs. 

If you decide that refinancing is right for you, you can check your rates without affecting your credit score through ELFI.*