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Guide to Student Loan Forgiveness 2023

A Guide to Student Loan Forgiveness
Nancy Bilyeau
Nancy BilyeauUpdated January 17, 2023
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Paying off your federal student loans is not only a struggle for millions of Americans but also has turned into a political landmine, with President Joe Biden’s proposed one-time student debt cancellation in limbo. There are all sorts of questions when it comes to student loans. When will the pause on federal student loan payments, instituted in March 2020, come to an end? And how do you find out more about student loan forgiveness programs you may be eligible for even if the Biden student loan forgiveness fails to go through? Read on to learn what loan forgiveness is, how it connects to the Biden plan, and where to go to find out what you may qualify for.

What Does Student Loan Forgiveness Mean?

In the context of student loans, forgiving debt means you are released from your obligations of paying all or some of what you owe for your college educationWhen looking into ways to get relief from your student loans, you may see the terms “discharge” or “cancellation,” and while they end up with the same result — a release from the obligation of having to pay — they do mean different things than forgiveness and they have different requirements.Since becoming president, Biden eliminated more than $32 billion of student loan debt before he unveiled his widespread debt-canceling proposal. Some of that amount was debt forgiveness, but a great deal was made up of canceled debt. The reasons range from loan holder disability to a closed school discharge.For example, in 2022, Biden provided $7.1 billion in relief for borrowers eligible for total and permanent disability (TPD). This included $5.8 billion in automatic student loan discharges to 323,000 borrowers and reinstating $1.3 billion in loan discharges for another 41,000 borrowers.

Biden Student Loan Cancellation

On Aug. 24, 2022, President Biden announced that if you have federal student loans and earn under $125K per year (the household maximum is $250,000), up to $10K of your federal student debt could be canceled.Additionally, if you received Pell Grants, you could receive an additional $10K of forgiveness.More than 26 million people applied for the debt relief through the loan forgiveness application. However, Biden’s plan was blocked by a lower court in a challenge by six states that have accused his administration of exceeding its authority. The loan forgiveness application was suspended.The only way Biden’s student loan forgiveness plan can move forward is if the administration wins on appeal. The administration is battling multiple lawsuits challenging the legality of the program. Some say Biden does not have the authority to cancel widespread debt, others that the program is unfair.The Supreme Court in December 2022 agreed to hear President Biden's bid to reinstate his plan to cancel student debt. Also, the Supreme Court agreed to fast-track the case, saying in a brief order they will hear arguments in their session that runs from late February to early March.

When Will Pause in Loan Payments End?

In March 2020, in response to the hardship caused by COVID-19, a “pause” was put into place. It amounted to a federal student loan payment holiday. There was a suspension of loan payments, a 0% interest rate, and a halt to collections on defaulted loans.The payment pause has since been extended nine times, most recently in November, when it was extended into 2023. There is no precise date for resumption.The White House “extended the student loan pause to address the financial harms of the pandemic, provide borrowers with a smooth transition back to repayment, and help borrowers at highest risk of delinquency or default once payments resume.”According to the Education Department, borrowers will resume payments 60 days after the court cases have been resolved. The DOE website says: “The student loan payment pause is extended until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that. We will notify borrowers before payments restart. If the courts have not resolved the issue by June 30, payments will resume 60 days after that.”

Types of DOE Student Loan Forgiveness

The forgiveness programs that have been administered by the DOE’s Federal Student Aid department for several years cover various areas. These programs once had a high rejection rate. After undergoing fierce criticism, the government overhauled them so that more people could benefit.“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness,” said U.S. Secretary of Education Miguel Cardona in October 2021. “The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country.”

Public Service Loan Forgiveness

If you are employed by a government or nonprofit organization, you may qualify for the Public Service Loan Forgiveness (PSLF) Program that Cardona spoke about.PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, says Federal Student Aid.

Teacher Loan Forgiveness

Under the Teacher Loan Forgiveness Program, if you teach full time for five complete and consecutive academic years in a low-income school or educational service agency, and meet other qualifications, you may be eligible for forgiveness of up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

Closed School Discharge

If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan. There are certain eligibility requirements to qualify for a closed school loan discharge; you must apply to get a discharge.

Income-driven Repayments

Income-driven repayment (IDR) plans are not the same as student loan forgiveness. They are designed to make student loan debt more manageable by reducing the monthly payment amount based on your income and family size. For people in financial distress, they can be very helpful.The DOE offers four different plans:

Refinancing Your Student Loans

To take advantage of low interest rates, some federal student loan holders may be interested in refinancing their existing federal loans with a private lender. This may be a path to lower monthly payments and a shorter (or longer) loan plan, but to obtain an appealing deal requires evaluation and approval by the private company. A person’s credit score becomes important when pursuing a refinanced government loan and comparing offers. However, refinancing is also possible with bad credit as well.If you refinance your student loan, that loan amount will no longer qualify for any of the federal government’s forgiveness initiatives, whether it’s the pause on payments due to the Covid pandemic, Biden’s new forgiveness plan, or loan reductions based on your income.

The Takeaway

Student loan forgiveness takes several forms. Most of the time, it means applying for one of the federal student loan forgiveness programs intended for people who’ve held public service jobs, teaching, or nursing jobs. The federal government wants to compensate those who’ve pursued such careers and has strengthened its programs for them.Forgiveness is also the phrase used to describe President Biden’s plan to cancel $10,000 of federal student loan debt per borrower who falls under the annual income threshold of $125K and an additional $10K for those who received Pell grants. This plan is undergoing court challenges.Refinancing, with its pros and cons, can produce a different interest rate and terms. Lantern makes it easy to prequalify with several lenders at once with no impact on your credit. Learn more about how to find and compare student loan refinance optionsExplore your student loan refinancing options with Lantern.

Frequently Asked Questions

Does anyone know when the pause will end for paying federal student loans?
Will debt relief be taxed?
What happens to a student loan if the person dies?
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Photo credit: iStock/GaudiLab

About the Author

Nancy Bilyeau

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.
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