Components of the Student Loan Debt Cancelation Sweep:
The Biden administration has already canceled nearly $32 billion of the $1.6 trillion in outstanding federal student debt by expanding existing forgiveness programs for public-sector workers, disabled borrowers and students who were defrauded by for-profit colleges. Read more about the canceled student loan debt. Here is a breakdown of some of these components:
The “limited PSLF waiver” refers to the time-limited changes to Public Service Loan Forgiveness (PSLF) Program rules that allow borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. This opportunity ends on Oct. 31, 2022.
Key Points: PSLF Summary of Changes
- For a limited time, you may receive credit for past periods of repayment on loans that would otherwise not qualify for PSLF.
- If you have FFEL Program loans, Federal Perkins Loans, or other federal student loans, you’ll need to consolidate your loans into a Direct Consolidation Loan to qualify for PSLF, both in general and under the new time-limited rules described on this page. Before consolidating, make sure to check to see if you work for a qualifying employer. Learn about consolidation and the pros and cons of consolidating your loans.
- Past periods of repayment will now count whether or not you made a payment, made that payment on time, for the full amount due, or on a qualifying repayment plan.
- Forbearance periods of 12 consecutive months or greater, or 36 cumulative months or greater will count under the waiver. In fall 2022, ED will begin making account adjustments to include these periods. Forbearance periods provided by the COVID-19 emergency relief flexibilities are not included toward these months.
- Months spent in deferment before 2013 will count under the waiver. Additionally, ED will include economic hardship deferment on or after Jan. 1, 2013. ED will apply these periods of deferment to your account in fall 2022.
- Periods of default and in-school deferment still do not qualify.
- ED is looking at long-term changes to the program such as allowing more payments to qualify for PSLF including partial, lump sum, and late payments, and allowing certain kinds of deferments and forbearances – such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service – to count toward PSLF.
Note: The qualifying employment requirement has not changed. To determine if your employer qualifies for PSLF, use our employer search tool.
Learn more about the PSLF changes or to fill out the waiver.
If you need assistance understanding PSLF requirements and procedure, you can schedule an appointment with the Personal Finance Program.
The Dept of Ed (ED) will be conducting a one-time revision of IDR payment counters to address past inaccuracies (including automatically discharging loans for eligible borrowers) and permanently fixing IDR payment counting by reforming ED’s IDR tracking procedures going forward. ED will begin work on implementing these changes immediately, but borrowers will not see the effect in their accounts until fall of 2022.
Key Points: IDR One-Time Count Revision
- As part of this initiative, ED will conduct a one-time revision of IDR-qualifying payments for all William D. Ford Federal Direct Loan (Direct Loan) Program and federally managed Federal Family Education Loan (FFEL) Program loans.
- ED will conduct a one-time account adjustment to borrower accounts that will count time toward IDR forgiveness, including
- any months in which you had time in a repayment status, regardless of the payments made, loan type, or repayment plan;
- 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance toward IDR and PSLF forgiveness;
- months spent in deferment (with the exception of in-school deferment) prior to 2013; and
- any time in repayment prior to consolidation on consolidated loans.
- Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan.
- If you have commercially held FFEL loans, you can only benefit from the IDR account adjustment if you consolidate before we complete implementation of these changes, which is estimated to be no sooner than Jan. 1, 2023.
- If you have made qualifying payments that exceed forgiveness thresholds (20 or 25 years), you will receive a refund for your overpayment.
ED is undertaking an effort to display borrower IDR payment counts on StudentAid.gov so that you can view your progress yourself. Additionally, ED is working on regulations to revise the terms of the IDR program to further simplify payment counting, which includes proposals to allow more loan statuses to count toward IDR forgiveness, including certain types of deferments and forbearances.
What to do now: IDR waiver changes are automatic. You don’t need to do anything unless:
Find out more information about IDR waivers.
Targeted Debt Cancellation for Repayment Transition
To address the financial harms of the pandemic by smoothing the transition back to repayment and helping borrowers at highest risk of delinquencies or default once payments resume, the Department of Ed (ED) will provide targeted student debt cancellation to borrowers with loans held by the Department of Education. Borrowers with annual income during the pandemic of under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) who received a Pell Grant in college will be eligible for up to $20,000 in debt cancellation. Borrowers who met those income standards but did not receive a Pell Grant will be eligible for up to $10,000 in relief. The Department will be announcing further details on how borrowers can claim this relief in the weeks ahead.
- Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the Department.
- The application will be available no later than December 31, 2022.
- Undergraduate loan payments will also see a change. Payments will be capped at 5% of discretionary income.
- Other income driven repayment plans may also see a payment reduction.
There is nothing you need to do right now to access new SL forgiveness of $10,000-$20,000.
Fresh Start for Defaulted Borrowers
Borrowers with federal student loans in default will be able to reenter current repayment status and have other federal student aid benefits and protections restored that will increase their long-term repayment success. On April 6, 2022, the U.S. Department of Education (ED) announced it would eliminate the negative effects of default for borrowers with defaulted federal student loans. This will enable approximately 7.5 million borrowers with defaulted federal student loans to return to repayment without any past due balance, just like every other borrower.
Loans Eligible for Fresh Start:
- Defaulted William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Defaulted Federal Family Education Loan (FFEL) Program loans (both ED-held and commercial held)
- Defaulted ED-held Perkins Loans
Commercial-held FFEL Program loans that defaulted after March 13, 2020, through the duration of the payment pause, will be returned to current standing through ED’s action to expand COVID-19 flexibilities. Because these loans will be returned to current standing, they are not eligible for Fresh Start benefits.
Loans Not Eligible for Fresh Start:
- Defaulted school-held Perkins Loans
- Defaulted Health Education Assistance Loan Program loans
- Student loans remaining with the U.S. Department of Justice (DOJ)
- Direct Loans and commercial-held FFEL Program loans that default after the end of the pause on student loan payments and collections
Get more information about Fresh Start.
Proposed IDR Reform:
In addition to the 5% discretionary IDR cap for undergraduate loans, the rule would also increase the amount of income that is considered “non-discretionary income” so no borrower earning below 225% of the federal poverty level will have to make a monthly payment. AND
- For borrowers with loan balances of $12,000 or less, loan balances wouldbe forgiven after 10 years of payments instead of the current 20-year mark, under the proposed new income-driven repayment plan.
- To help prevent a borrower’s loan balance from growing while the individualmakes monthly payments, under the proposed rule the Biden administration would cover unpaid monthly interest, even if the monthly payment is $0 due to the borrower’s income level.
Pending Long Term Student Loan Actions:
- ED is taking steps to reduce the cost of college for students and their families and hold colleges accountable for raising costs, especially when failing to deliver good outcomes to students.
- The Department has already re-established the enforcement unit in the Office of Federal Student Aid and recently withdrew authorization for the accreditor that oversaw schools responsible for some of the worst for-profit scandals.
- Proposals include publishing an annual watch list of the programs with the worst debt levels in the country and requesting institutional improvement plans from colleges with the most concerning debt outcomes that outline how the college intends to bring down debt levels.
- The Biden-Harris Administration is also trying to reduce the cost of higher education by working to make community college free and doubling the maximum size of the Pell Grant.