What We Know About About Student-Debt Cancellation


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Here’s what: We’re on a journey with student loan forgiveness

If you’re among the tens of millions of Americans whose federal student-loan payments have been on pause for the past two years, hello. You’re among friends here. Let’s talk forgiveness.

Since early in the COVID-19 pandemic, the US has been an extraordinary experiment: What when we pause the debts of a large swath of the population? Good things, it turns out.

According to a March report from the California Policy Lab, many pause-affected borrowers have seen their credit scores rise; some reduced their debt loads by redirecting their cash to other debts, like car notes and credit cards, and others sought higher-paying jobs thanks to newfound financial flexibility.

As for the broader implications of the pause? Some experts say the economy has been “more than fine” without billions funneling to the federal government, which may explain why the Biden administration has been dancing around the issue of student-loan forgiveness for the past 12+ months, and why advocates are pushing hard for broader debt cancellation.

Here’s a rundown of what’s been going on

  • The pause on federal student-loan payments was extended (for the sixth time) until August 31, 2022. No word yet on whether payments will actually restart after that date. The scope of the pause was also expanded in March, adding more borrowers.
  • This month, the Department of Education wiped out $6 billion of debt for roughly 200,000 borrowers who attended predatory for-profit colleges, including DeVry University and the University of Phoenix. See a full list of qualifying schools here.
  • In April, the department brought many borrowers closer to forgiveness (or forgave their loans entirely) when it made changes to income-driven repayment plans. Find out more about the changes and see if you qualify here.
  • The same month, borrowers whose loans had been in delinquency or default before the pause were given a “fresh start” and returned to good standing, allowing them to get back on track with payments when the pause eventually ends.
  • Last year, over half a million public-sector workers became eligible for loan forgiveness when the Education Department made temporary changes to the Public Service Loan Forgiveness program. The temporary wave expires in October; learn more here and apply soon.
  • More than 320,000 permanently disabled borrowers had their debts automatically forgiven in 2021.
  • The department has also canceled billions in debt for defrauded borrowers who attended Corinthian Colleges and other private, for-profit institutions under the “borrower defense to loan repayment” program. Learn more about the program here and find out how to apply.

Who should be paying attention?

According to my colleague Ryan Wangman, Personal Finance Insider’s loans reporter, anyone with federal student loans should be watching the Biden administration’s moves.

“While widespread forgiveness hasn’t yet been announced, many borrowers who previously didn’t qualify for forgiveness are now eligible,” he said. “Keep up with the latest news to make sure you don’t miss out on any aid you might qualify for.”

He noted that while a majority of federal borrowers have not yet had any of their debt canceled — and private borrowers also have not had any loans forgiven — more news is expected.

“The timeline on wide-scale forgiveness is still murky. The rumor is that a decision will come ‘later this summer,’ but this timeline has been a moving goalpost ever since Biden came into office,” he told me. “If a widespread loan cancellation does happen, it’ll likely be about $10,000 per borrower, means tested for income.”

What can you do now to get your loans forgiven?

If you don’t want to wait for an announcement from the Biden administration, or $10,000 won’t really help you move the needle on your debt, there are ways you can make progress toward greater or total loan forgiveness on your own.

Ryan recommends looking into Public Service Loan Forgiveness if you’re an eligible public-sector worker (like a teacher, nonprofit employee, government worker, and more). Some income-driven repayment plans also end in loan forgiveness after 20 or 25 years.

Borrower defense to loan repayment may be an option if you think your school defrauded you. Plus, Ryan adds, “Some states and professions” — such as nursing — “have specific programs you may be eligible for that can reduce the cost of your debt further.”

Student-loan forgiveness is in the air. May the breeze blow it ever closer — and fast.

— Stephanie Hallett, senior editor of Personal Finance Insider

More on student loan forgiveness

Nationwide student-loan forgiveness isn’t guaranteed, so have a plan in place for repaying your loans

While it seems likely the Biden administration will cancel some student debt, you may still owe when the payment pause ends. Reassess your budget now so you can get prepared.

6 ways to use your money to build wealth while student loan payments are on pause

If you don’t need your extra money to pay off other debts at the moment, try investing it or saving it in a high-yield savings account for a rainy day.

Private student-loan forgiveness doesn’t exist — here are 3 alternatives to consider

Private student loan borrowers have been left out of the pandemic pause and talks of forgiveness. But state and profession-specific programs may be available. And refinancing to a lower interest rate can help you pay less over time.

Student loans can leave you burdened with debt for years. Here’s how to avoid them.

If you’d rather get off this loan-forgiveness merry-go-round (or at least ensure your kids never have to get on it), factor affordability into your college decision, and look for financial aid and awards you don’t have to pay back.

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