Student Loan Forgiveness Updates and FAQs: Who Qualifies and How To Apply

Vault’s Viewpoint

• In some cases, the government can declare your federal student loans forgiven. This means that you don’t have to pay back some or all of your loans.
• President Biden’s original student loan forgiveness program isn’t happening. The Supreme Court voted against Biden’s plan to forgive $10,000–$20,000 of federal student loan debt per borrower in June 2023.
• However, the Biden administration’s new SAVE Plan can lower monthly payments down to $0 for many borrowers. Instead of one-time relief, the SAVE Plan is an income-driven repayment plan that’s more generous than previous income-driven repayment (IDR) plans. The Department of Education calls it their “most affordable repayment plan ever.” 

Student Loan Statistics

• There was $1.6 trillion in outstanding student loan debt as of the fourth quarter of 2023 (Federal Reserve Bank of New York). 
• Private student loans account for 7.52% of student loan debt in the United States (Enterval Analytics).
• As of the third quarter of 2023, total outstanding student loan debt, including private loans and federal loans, amounts to $1.73 trillion (Enterval Analytics).
• As of the fourth quarter of 2023, there are 43.2 million federal student loan borrowers in the United States (Federal Student Aid).
• As of the fourth quarter of 2023, Parent PLUS loans are held by 3.8 million borrowers to the tune of $112.2 billion in outstanding debt (Federal Student Aid).
• For the 2023-2024 academic school year, the average published sticker prices for tuition and fees at four-year public universities were $11,260 for in-state students and $29,150 for out-of-state students (CollegeBoard).

Public two-year, in-district schools had an average published price for tuition and fees of $3,990 for the 2023-2024 academic school year (CollegeBoard).

What Is Biden’s Student Loan Forgiveness Program?

President Biden’s one-time student debt relief program was struck down by the Supreme Court in June 2023. The plan would have forgiven $10,000–$20,000 of federal student loan debt for borrowers up to certain income thresholds.  

Given the court’s decision, that’s not going to happen now, but there are other loan forgiveness programs available. Also, though it isn’t really a forgiveness program, President Biden’s new SAVE Plan (detailed at the end of this article) can drastically reduce monthly payments. 

Student Loan Forgiveness Update 

There’s been a lot of movement around student loan forgiveness in recent months. Much of this movement has to do with actions taken by the Biden Administration, which was stymied in its efforts for blanket student loan cancellation by a Supreme Court decision last June.

Much of the student loan forgiveness to this date is related to updates to current cancelation programs and the introduction of the Saving on a Valuable Education (SAVE) plan. But there is some confusion around deadlines and how to consolidate student loan debt for best results.

Student Loan Forgiveness Approvals to Date

As of this writing, more than $100 billion in student loan forgiveness for more than 3.7 million borrowers has been implemented through the following actions:

• Fixes and updates to Public Service Loan Forgiveness (PSLF): $56.7 billion
• Updates to income-driven repayment programs: $45.6 billion
• Relief for borrowers who qualify for permanent disability: $11.7 billion
• Relief for borrowers who qualify under borrower defense, due to school closures or who have been part of lawsuits: $22.5 billion

Student Loan Forgiveness Under the SAVE Plan

The SAVE plan appears to be one of the main vehicles the Biden Administration hopes to use to fulfill promises of student loan forgiveness. Some of the main provisions of the SAVE plan that offer forgiveness (in addition to payments limited to 5% or 10% of discretionary income, with no unpaid interest accrual):

• Student loan forgiveness after 20 or 25 years on the plan, depending on whether you have graduate loans or only undergraduate debt.
• For people with under $12,000 in original student loan debt, forgiveness comes after 10 years. Some borrowers have already received this benefit beginning in February 2024.
• It’s possible to get earlier forgiveness based on how much you originally borrowed, using a formula that offers forgiveness after 10 years but before 20 years depending on how much more than $12,000 you originally borrowed.

What Is the Double Consolidation Loophole for Parent PLUS Borrowers? 

In general, people with parent PLUS loans aren’t eligible for certain income-driven repayment plans, including those that result in student loan cancelation. Parent PLUS loans aren’t eligible for the SAVE plan. But one way to get around that is through the double consolidation loophole.

The double consolidation loophole obscures the origin of your PLUS loans. But it’s a process, so it’s important to take specific steps: 

• Go to the National Student Loan Data System (NSLDS) and identify your parent PLUS loans.
• Divide your loans into two different groups. Use the identification information to make sure you’re doing two different consolidations with two different groups of parent PLUS loans.
• Identify two different servicers to which you can assign your different consolidation loans.
• Use the paper consolidation form to apply for consolidation. Remember: You’re filling out a paper form that allows you to designate two different consolidation loans.
• Once you receive confirmation of your two different consolidations, you can apply for another consolidation that combines those two loans.

Once you complete this process, you can apply for the SAVE plan and potentially reap the benefits, including forgiveness. This loophole is closing in mid-2025, so people wishing to take advantage of the double consolidation loophole should move forward with the awareness that it can take months for each consolidation to finalize, especially when you use paper.

Who or What Qualifies for Student Loan Forgiveness?

• Teachers: Teachers Loan Forgiveness cancels up to $17,500 of loans for teachers who work for five consecutive academic years in a low-income school or education facility that teaches high-need students.
• Public servants: Government employees and 501(c)(3) not-for-profit workers who have Direct Loans are eligible for Public Service Loan Forgiveness (PSLF). The PSLF Program forgives the remaining balance on your Direct Loans once you’ve made 120 qualifying monthly payments (or paid the equivalent amount) while working full-time for a qualifying employer.
• People with disabilities: Your debt balance may be discharged if you are totally and permanently disabled and have a Direct Loan, Federal Family Education Loan (FFEL) Program loan or Federal Perkins Loan.
• People who have been paying off loans for 20+ years: All income-driven repayment plans may discharge remaining debts after 20 or 25 years. As of 2023, past payments will count toward this requirement even if you weren’t enrolled in an IDR at the time. The federal government will automatically review all accounts for this forgiveness opportunity, and if you’ve overpaid, you will get a refund. 
• If your school closed down or misled you: Closed school discharge and borrower defense discharge protect borrowers from schools that don’t deliver on their promises. 
• Perkins Loan borrowers: Once you’ve completed eligible employment or volunteer requirements (including in education, firefighting, the military or the Peace Corps), your debt may be eligible for forgiveness. 
• Forgery victims: Those who have their identity stolen or have loans taken out in their name without their knowledge may be eligible for loan discharge. 
• Those who file for bankruptcy: If you’ve declared bankruptcy or plan to, you can file a motion in bankruptcy court to have your student loans discharged. This is called an “adversary proceeding.” 
• Death: Federal student loans are forgiven if the borrower or the student on whose behalf a PLUS loan was taken out dies.

Do I Have To Apply for Student Loan Forgiveness?

In most cases, you do have to apply for student loan forgiveness. 

The exception to this is for people who have been paying their loans down for more than 20 years. The federal government will notify borrowers who reach the necessary forgiveness threshold of 240 or 300 months of payments.

You can apply for all types of forgiveness on StudentAid.gov, and you should avoid applying on other sites. 

How Do I Know My Student Loans Are Forgiven?

When your loans are forgiven, you’ll receive an official communication from the Department of Education. You might get this electronically, through physical mail or both. When you apply for loan forgiveness on StudentAid.gov, make sure your contact information is correct so that you don’t miss important communications about your loan status. 

The letter should detail the total forgiveness amount, the discharge date and any refund amount if applicable. 

Are Forgiven Student Loans Taxed?

The American Rescue Plan Act (ARPA) prohibits federal student loan forgiveness from being taxed until 2025. 

Assuming the laws revert after the American Rescue Plan Act expires, most types of loan forgiveness still will not be taxable, including Public Service Loan Forgiveness and Teacher Loan Forgiveness. 

The exception is loan discharges under IDR plans—the amount that gets forgiven is subject to federal income taxes. For example, if you have $10,000 of student loans discharged, your taxable income for that year will increase by $10,000. 

Are Student Loan Payments Still Paused?

The federal student loan forbearance program that began in March 2020 officially ended in September 2023. Interest began accumulating on September 1, and the first payments were due in October. 

What Is a Pell Grant?

Unlike a loan, Federal Pell Grants do not have to be repaid (except in special cases). They’re awarded only to undergraduate students who have exceptional financial need and have not already earned a bachelor’s degree or higher. 

When you fill out a FAFSA form, you are automatically considered for Pell Grants, along with other types of federal student aid. The amount awarded depends on your family’s income, your school’s cost of attendance, your status as a full-time or part-time student and the length of time you plan to attend school. 

How To Check if I Had a Pell Grant

Log in to StudentAid.gov to see your aid history, including whether you received a Pell Grant. 

Sometimes, this information can be delayed. Reach out to your school’s financial aid office if the information isn’t correct. 

What Types of Loans Are Eligible for Student Loan Forgiveness?

Federal Loans 

There are four main types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans (for graduate students) and Direct Consolidation Loans. All are eligible for some types of student loan forgiveness, though individual forgiveness programs may have varying requirements.

FFEL Program Loans

Under the Federal Family Education Loan (FFEL) Program, private lenders made education loans that were guaranteed by the federal government. 

• These loans included Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans and FFEL Consolidation Loans. 

No new loans under the FFEL Program have been made since June 30, 2010, but existing FFEL loans are eligible for some types of student loan forgiveness.

Federal Perkins Loan

Federal Perkins Loan Program loans are low-interest federal student loans for both undergraduate and graduate students with exceptional financial need. 

No new loans under the Federal Perkins Loan Program have been made since September 30, 2017, but existing Perkins loans are eligible for forgiveness.

What Types of Loans Are Not Eligible for Student Loan Forgiveness?

Private student loans are not eligible for student loan forgiveness. This includes loans taken out with banks, credit unions, state agencies or schools. 

What Is the New Income-Driven Repayment Plan?

Following the Supreme Court’s decision to strike down President Biden’s loan forgiveness plan, the Biden-Harris administration debuted a new program, the SAVE Plan. It’s a bit more complicated and applies to fewer people, but it’s helpful for many low- and middle-income borrowers. 

Unlike Biden’s first plan, the SAVE Plan does not provide immediate loan forgiveness. Instead, it’s an income-driven repayment (IDR) plan that can reduce your monthly payments as well as the total years you have to pay before your remaining balance is forgiven. It’s most applicable to low- to middle-income borrowers. 

How IDR Plans Work

Many income-driven repayment plans calculate your discretionary income to determine how much your loan payment should be each month. Traditional IDR plans say that your discretionary income is the difference between your salary and 150% of the federal poverty guideline.

• In 2023, that poverty guideline is $14,580 for a single person, and 150% of that is $21,870. So, someone with a $50,000 salary would have a discretionary income of $28,130. 

IDR plans specify a percentage of that discretionary income—usually 10%—for your annual student loan payment amount. Using the same salary example as above, that would be $2,813 annually, which works out to a monthly payment of about $234. You would make that payment for a certain number of years (though the payment would change as your income changes), and then your remaining debt would be forgiven. 

How SAVE Works

The SAVE Plan follows this general structure, but it’s more generous than other IDR plans in several ways. 

Lower Monthly Payments

The SAVE Plan considers your discretionary income to be the difference between your salary and 225% of the federal poverty guideline—not 150%. That translates to a lower discretionary income and a lower monthly payment.

• In this $50,000 salary example, that translates to loan payments of about $1,720 per year or $143 per month. 
• A single borrower earning $32,800 or less or a family of four earning $67,500 or less (the amounts are higher in Alaska and Hawaii) will have loan payments of $0 per month. 

No Interest

If you make your monthly payment, your loan balance won’t grow due to unpaid interest. That means you won’t find yourself owing more after years of making payments.

Shorter Forgiveness Window 

Under SAVE, those who borrowed $12,000 or less can have their remaining debts forgiven after 10 years of payments. Every $1,000 over the $12,000 mark adds an extra year of required payments, with a maximum of 20 years for undergraduate loans and 25 years for graduate loans.

Applying for SAVE

If you were already enrolled in the Revised Pay As You Earn (REPAYE) Plan, which is being replaced with SAVE, you’ll be automatically enrolled in SAVE. Otherwise, you can apply for SAVE through the Department of Education. 
If you’re not sure if SAVE makes the most sense for your situation, you can run your information through the Department of Education’s loan simulator, which will give you estimated monthly payments and payoff timelines for a variety of repayment strategies.

Future Student Loan Forgiveness Efforts

Other efforts are forthcoming for more student loan forgiveness. 

Military PSLF

One specific effort is aimed at automatically enrolling military service members in PSLF. This bill, currently in Congress, would get rid of the requirement to enroll and track efforts to receive PSLF for veterans and people currently serving. This would make it easier for veterans to benefit from PSLF as well since it would waive the requirement that they contact their former superiors to approve their paperwork.

FFEL Consolidation

Older student loans, made before the implementation of the Direct loan program, might not be eligible for some of the same student loan forgiveness benefits—unless they take advantage of a consolidation and receive an adjustment. 

Until now, consolidating old Federal Family Education Loan (FFEL) debt into a Direct loan would restart the clock on forgiveness based on income-driven plans or PSLF. With the new cancelation guidance, some FFEL borrowers who have had their loans for years could benefit. They could consolidate to a Direct loan and then the Department of Education would review the ages of the loans and their current situation and make a potential adjustment that would move them closer to student loan forgiveness.

Adjustments should be made by July 1, so the Biden Administration is encouraging people who might benefit to complete their paperwork soon since it takes about 60 days for consolidation paperwork to complete.

Newsweek writer Miranda Marquit contributed to this post.