As President Joe Biden nears the end of his term, he’s offering two new student loan forgiveness programs designed to provide much-needed relief to millions of Americans struggling with student debt. These new initiatives, which target Income-Driven Repayment (IDR) plans and the Public Service Loan Forgiveness (PSLF) program, aim to make it easier for borrowers to qualify for forgiveness and finally eliminate their student loan balances.
In this guide, we’ll break down these new opportunities, explain how they work, and offer practical steps for borrowers to take advantage of them before the window closes.
Key Details of Biden’s New Student Loan Forgiveness Programs
- Income-Driven Repayment (IDR) Adjustments: More favorable forgiveness terms and better payment counting.
- Public Service Loan Forgiveness (PSLF) Expansion: Simplified eligibility for public service workers.
- Action Required: Take advantage of these programs before the deadlines arrive.
These new options offer a critical opportunity for borrowers who have struggled with student loan payments for years, especially those in public service jobs, to have their remaining balances forgiven faster.
Understanding the New Forgiveness Options
In recent years, the Biden administration has focused on expanding student loan forgiveness options, with key reforms targeting IDR plans and the PSLF program. Here’s a closer look at each.
Income-Driven Repayment (IDR) Adjustments
Income-driven repayment plans adjust the monthly payments based on your income and family size. In some cases, payments can be as low as $0 if your income is low enough. After 20 to 25 years of qualifying payments, any remaining loan balance can be forgiven.
Recent updates to these plans offer several improvements:
- Expanded Payment Counting: Under the new changes, more payments will count toward forgiveness, meaning that borrowers who have been paying for years may see their debt wiped out sooner.
- Simplified Application: The process for applying for forgiveness has been streamlined, reducing paperwork and making it easier to submit the necessary forms.
Public Service Loan Forgiveness (PSLF)
PSLF is designed for individuals who work in government or non-profit roles, or any other position that serves the public good. By making 120 qualifying monthly payments under an IDR plan, workers in eligible jobs can have their federal student loans forgiven.
Biden’s administration has worked to make it easier for public service workers to qualify:
- Temporary Expanded PSLF (TEPSLF): This initiative temporarily broadens the types of payments that count toward forgiveness, including those made under certain non-eligible plans.
- Streamlined Application: The process for applying has been simplified, and the U.S. Department of Education has proactively contacted borrowers to help them understand their path to forgiveness.
Both the IDR adjustments and PSLF expansions are designed to help borrowers who have been paying for many years and have struggled to reach forgiveness.
Steps to Take Advantage of Student Loan Forgiveness Programs
To make the most of these programs, here are some actionable steps you should follow:
- Check Your Loan Status
Before applying, confirm whether you have federal loans and if you are eligible for the forgiveness programs:- Visit studentaid.gov and log into your Federal Student Aid account to review your loan details.
- Ensure your loan servicer has up-to-date records of your payments. Errors in loan servicing could delay your eligibility for forgiveness.
- Review Your Repayment Plan
If you’re on an IDR plan, check if you’re using the best option for your situation. There are several plans to consider:- Revised Pay As You Earn (REPAYE): A plan that offers low payments based on income, sometimes even $0.
- Pay As You Earn (PAYE): This plan is capped at 10% of your discretionary income.
- Income-Based Repayment (IBR): The terms for this plan depend on when you took out your loans.
Switching to the most advantageous IDR plan could speed up your path to forgiveness.
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- Submit Your PSLF Application
For those working in public service, submitting an application for PSLF is key. Here’s how:- Submit an Employment Certification Form to the U.S. Department of Education to confirm your job is eligible.
- Track Your Payments: Ensure you’re enrolled in an IDR plan that qualifies for PSLF and keep records of your monthly payments.
Time is critical, especially with recent changes that have expanded PSLF eligibility. Submit your application as soon as possible to avoid missing out.
- Look for Temporary Relief Programs
Following the COVID-19 pandemic, several relief measures were introduced, such as:- Payment Suspension: Some loan payments were paused without accruing interest, which could help you catch up or accelerate your progress toward forgiveness.
- Expanded Eligibility: New adjustments may have been introduced that affect qualifying payments under both IDR and PSLF. Check your eligibility regularly at studentaid.gov.
Maximizing Forgiveness: Additional Tips
While the new forgiveness options provide a great opportunity, here are some tips to help you make the most of these programs:
- Track Your Payments: Regularly log into your loan servicer’s website and use tools like the PSLF Help Tool to ensure your payments are counted toward forgiveness.
- Submit Your Employment Certification Form Annually: Even if you think it’s not necessary, this helps ensure your job qualifies for PSLF and that your payments are tracked properly.
- Consider Refinancing (With Caution): If you’re not eligible for forgiveness or public service work, refinancing could lower your interest rate. However, be cautious, as refinancing federal loans will make you ineligible for federal protections like forbearance and forgiveness.
Pitfalls to Avoid
Despite the new opportunities, there are a few pitfalls to watch out for:
- Missed Deadlines: Missing deadlines for submitting necessary paperwork or applying for forgiveness could delay or disqualify you from getting your loans forgiven. Mark key dates and check with your loan servicer regularly.
- Ineligible Loan Servicers: Not all loan servicers participate in the forgiveness programs. Verify that yours is on the approved list to avoid any confusion.
- Payment Tracking Errors: Be diligent about tracking your payments. Discrepancies could delay your progress toward forgiveness. If you notice issues, contact the Department of Education for assistance.
Frequently Asked Questions
How long does it take to get student loan forgiveness? Typically, forgiveness takes 10 to 25 years depending on the program. PSLF requires 10 years of qualifying work, while IDR forgiveness takes 20-25 years.
Can I apply for forgiveness if I’m not in public service? Yes, you can apply for forgiveness through the IDR adjustment program, which is available to all federal student loan borrowers.
Will I be taxed on the forgiven amount? Currently, student loan forgiveness under IDR and PSLF is not considered taxable income, but it’s advisable to check with a tax professional to confirm this status when your loan is forgiven.
What if I’ve been denied forgiveness before? If you were previously denied forgiveness, it’s worth applying again. The Biden administration has made changes to eligibility, so you may now qualify.
With these updates, millions of borrowers may finally have a clearer path toward financial freedom. Don’t miss out on these last-chance opportunities before the deadline!