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Guide to Student Loan Forgiveness 2023

A Guide to Student Loan Forgiveness
Nancy Bilyeau
Nancy BilyeauUpdated July 7, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
After the Supreme Court blocked President Joe Biden’s proposed one-time student debt cancellation, paying off federal student loans became even more challenging for millions of Americans. Not only is Biden’s forgiveness program no longer happening, but the three-year pause on federal student loan payments comes to an end on Aug. 30. Interest on all federal student loan debt, regardless of income, is set to resume accruing starting on Sept. 1, 2023, and payments will be due starting in October.Fortunately, there are other options that may help struggling borrowers, including student loan forgiveness programs you may be eligible for. Read on to learn what loan forgiveness is, how it works, 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 education. When 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 has eliminated more than $66 billion of student loan debt that had nothing to do with his blocked one-time forgiveness plan. 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 to debt relief for those who work in public service.For example, as of 2023, Biden has provided $9.8 billion in relief for 469,000 borrowers eligible for total and permanent disability (TPD). 

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. 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. 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.”The payment pause will end for good on August 30, as part of the debt ceiling bill that was passed in June. Borrowers will begin repaying their student loans in October 2023.The president said in a June 30 press conference he is creating an “on ramp” program that will allow federal loan borrowers to not be considered delinquent if they miss a payment from Oct. 1, 2023 to Sept. 30, 2024. Biden says the Education Department won’t refer borrowers who fail to pay their student loan bills to credit agencies for those 12 months, to give borrowers time to “get back up and running.”

Income-driven Repayments and SAVE

The Saving on a Valuable Education (SAVE) Plan replaces the existing Revised Pay As You Earn (REPAYE) Plan. Borrowers on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.The new plan can significantly decrease your monthly payment amount compared to all other income-driven repayment plans.The SAVE Plan, like other income-driven repayment (IDR) plans, calculates your monthly payment amount based on your income and family size. The SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers.The SAVE Plan includes multiple new benefits for borrowers. The changes below will go into effect this summer.If you are already enrolled in the REPAYE Plan or if you sign up for the REPAYE Plan today, you will automatically be put on the SAVE Plan once it becomes available. The application for the new SAVE Plan will be available this summer. We will notify borrowers directly when the new application is available.If you apply for an IDR plan now and select the REPAYE Plan, you will automatically be put on the SAVE Plan once it becomes available.If you are already on an IDR plan, check to see if you are on the REPAYE Plan. Log in to StudentAid.gov and go to your My Aid page, scroll down, and view your loans. Each loan will list a repayment plan. If you see that you are in the REPAYE Plan, that means you’ll automatically be enrolled in the SAVE Plan later this summer. If you’re on a different repayment plan, you’ll need to switch into REPAYE now, or SAVE once it’s available, to receive the benefits of the SAVE Plan. If you don’t have a StudentAid.gov account, you can create an account.

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.

Refinancing Your Student Loans

Some federal student loan holders may be interested in refinancing their existing federal loans to lower their monthly payments by getting lower interest rates.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 a private lender. A person’s credit score becomes important when pursuing a refinanced government loan and comparing offers. If you refinance your student loan, that loan amount will no longer qualify for any of the federal government’s forgiveness initiatives, benefits, or protections. Make sure you carefully weigh the advantages and disadvantages of refinancing.

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.Refinancing, with its pros and cons, may produce a different interest rate and terms. With Lantern, you can prequalify with several lenders at once with no impact on your credit. Just remember that refinancing federal loans makes them ineligible for federal benefits.Exploring your student loan refinancing options is easy 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
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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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