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What student loan forgiveness might mean for your student loans

Fox Business logoFox Business 6/28/2022 Andrew Dunn

On the campaign trail, President Joe Biden promised to forgive a large portion of the country’s student loan debt. Now, those plans appear to be closer to reality. 

Though no details have been finalized, here’s what you need to know about where student loan forgiveness stands and how you might handle your loans in the meantime.

If you’re looking to refinance your student loans, visit Credible to see your prequalified student loan refinancing rates from various private lenders, all in one place.

While no formal plans have yet been announced, the Biden administration has indicated who may qualify for federal student loan forgiveness. Generally, you’ll need to fall within income limits, though reports have put those limits in the six figures. Another important note: Any plan would only apply to federal student loans, held by some 37.9 million borrowers nationwide. Private student loans wouldn’t fall under a debt forgiveness plan. 

More recently, the Biden administration said it’s considering a plan to broadly forgive up to $10,000 in federal student debt for each borrower, according to multiple media reports. The plan under consideration would require you to earn less than $150,000 per year to qualify, or be in a household earning less than $300,000 if you’re married and file taxes jointly.

Without income limits, forgiving up to $10,000 in federal student loans would completely wipe out the federal student loan debt of about 11.8 million people, according to an analysis by economists at the New York Fed. The average student loan borrower would benefit by $8,478, and nearly one in three delinquent loans would be forgiven under such a program. The cost to the U.S. taxpayer would be $321 billion, according to the New York Fed analysis. Fewer people would benefit with an income limit of $150,000 per year, but the exact number is unclear. 

The student loan forgiveness plans under consideration are different from the federal student loan benefits that the government enacted at the beginning of the COVID-19 pandemic. 

The U.S. Congress put a moratorium on student loan payments starting on March 13, 2020, as part of the CARES Act law responding to the coronavirus pandemic. The payment pause has been extended eight times since then — most recently in April 2022, when the Biden administration pushed the moratorium through the end of August. 

Automatic payment plans have been suspended, and the federal government has stopped collections on loans in default. However, payments are set to resume on Sept. 1 — unless the administration extends the suspension again.


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Interest rates on federal student loans have dropped to 0% as part of the moratorium, meaning no interest has accrued since then and any payments you’ve made have gone straight to your loan principal. 

The Biden administration has also taken several other actions to forgive student loans in particular circumstances. This includes changes to the Public Service Loan Forgiveness (PSLF) Program that make it easier to qualify, like increasing the number of types of payments that can be counted toward the minimum needed to have loans forgiven. The administration has also forgiven loans taken out by students at several for-profit schools that were determined to have misled students about their job prospects after attending, including DeVry University and ITT Technical.

Visit Credible to see your prequalified student loan refinancing rates from various private lenders, all in one place.

A GUIDE TO STUDENT LOAN FORGIVENESS PROGRAMS

Even if plans for broad student loan forgiveness don’t come to fruition, you can find several ways to have your federal student loans forgiven. These depend on the type of job you have and the repayment plan you’re under. Forgiveness options include:

You may qualify for a student loan cancellation or discharge if you become totally disabled or if your school closes while you’re enrolled. 

STUDENT LOAN FORGIVENESS PROGRAMS: WHICH ONE IS BEST FOR YOU?

While there may be a chance of broad loan forgiveness, it’s still important to take steps to make sure you’re ready for required payments to resume at the end of August. Visit your loan servicer’s website and make sure all your information is still correct — like your current address and contact information. Review any automatic payment information, and consider taking this time to find a new payment plan that may work better for you than the one you were enrolled in pre-pandemic.

You may also consider consolidating your federal student loans into a Direct Consolidation Loan. This allows you to combine multiple federal loans into a single loan with one payment. You’ll have a fixed interest rate that’s a weighted average of the rates you were paying on your current loans. 

But be careful before refinancing federal loans into a private student loan. When you do this, you’ll lose access to benefits and protections — like income-based repayment plans — as well as eligibility for any future loan forgiveness from the government.

If you have private student loans and your financial situation has improved since you took them out, you may qualify for a lower interest rate than you’re currently paying. Refinancing your private loans into a new private loan could potentially save you thousands of dollars in interest over the life of your loans. You can also refinance your student loans to add or remove a cosigner from your loans. 

If a refinance is right for you, visit Credible to quickly and easily see your prequalified student loan refinancing rates from private lenders.

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