The Biden administration has touted $25 billion in approved student loan forgiveness for borrowers over the past year and a half. At least 1.3 million borrowers have been determined to be eligible.
But given the multiple student loan relief programs involved, the continued pause in student loan payments, and the significant changes to the student loan administration system that continue to occur, many borrowers may not even be aware. of these initiatives.
Here’s what you need to know.
Biden’s student loan forgiveness goes through targeted initiatives
The Biden administration’s student loan forgiveness initiatives have, so far, received so-called “targeted” relief. This involves the administration focusing on existing student loan forgiveness programs and using executive action to ease restrictions, expand access, or streamline the application or approval process. Here are the programs the administration has largely focused on so far:
- $7.9 billion in student loan forgiveness for borrowers defrauded or harmed by their schools. This includes borrower defense through repayment—where a school misrepresented the truth about key aspects of an education program—and the Closed School Break Program, where a school closure prevented borrowers to graduate. The Ministry of Education estimates that around 690,000 student borrowers have been approved for release under these initiatives.
- $7.3 billion through the Public Service Limited Loan Waiver (PSLF) Program, which temporarily relaxes PSLF rules to significantly expand access for borrowers who have dedicated their careers to the work in the public service. At least 127,000 borrowers have been approved so far, according to the Ministry of Education. The PSLF limited waiver program is due to end on October 31, 2022.
- At least $8.5 billion in total and permanent disability (TPD) leave for borrowers with disabilities. The Department has simplified access to this program by automating the application process for borrowers receiving Social Security disability benefits. More than 400,000 borrowers have benefited so far, says the administration.
Some student loan forgiveness relief is automatic
In an effort to provide streamlined relief, the Biden administration has worked to provide automatic student loan forgiveness wherever possible. For example, the administration recently approved nearly $6 billion in student loan forgiveness for 560,000 borrowers as part of borrower defense until repayment for those who previously attended Corinthian Colleges, a chain for-profit universities that collapsed in 2015; eligible borrowers don’t even have to submit an application. In addition, much of the TPD discharge relief is also automatic through a data-sharing initiative between the Department of Education and the Social Security Administration.
For other programs, it’s a bit more complicated. For direct loan borrowers who have already certified their government employment, many have already received automatic student loan forgiveness under the limited PSLF waiver, as the Department automatically provides relief when it can. But other borrowers may have to take steps to qualify.
Some borrowers may need to apply for student loan forgiveness or take other steps to qualify
It can be confusing for borrowers whether or not action is needed to get some of the new student loan forgiveness and associated relief:
- For the limited PSLF waiver (and for the new IDR adjustment initiative), borrowers with loans from the FFEL program would need to consolidate those loans through the Federal Direct Consolidation Program for those loans to be eligible. And any borrower (whether they have direct or FFEL loans) would have to certify their government employment on official PSLF Ministry of Education forms to obtain credit during the limited PSLF waiver period. The deadline is October 31, 2022.
- For disabled borrowers, even if you do not qualify for automatic relief based on Social Security disability benefits, you can still submit a formal application. discharge requestalthough you may need to include a Physician’s Certification Form — part of the application completed and signed by your doctor — confirming that you meet the eligibility criteria.
- For borrowers who did not attend Corinthian Colleges but were nonetheless defrauded by their school through false promises or misrepresentations, you can still submit a formal Borrower Defense Request to the Department of Education.
The Federal Student Loan Forgiveness Is Not Taxable – For Now
Under the US bailout law passed by Congress and signed by President Biden last year, federal student loan forgiveness under any program is not considered taxable income under federal law (normally, when a debt is forgiven, canceled, or discharged, it could be considered taxable “income” to the borrower, unless there is a specific exclusion in federal law). However, this relief is temporary and is scheduled to end at the end of 2025 unless Congress extends it or makes it permanent.
Notably, there is an exception for Public Service Loan Forgiveness (PSLF), which is expected to remain tax-exempt under federal law even after 2025.
More student loan forgiveness may be coming
The Biden administration has indicated that the $25 billion in student loan forgiveness approved so far may just be the start. This figure does not include any student loan forgiveness under recently announced changes to income-contingent repayment (IDR) programs, which could result in billions in additional student loan forgiveness. These changes are not expected to be implemented until late fall at the earliest.
Meanwhile, the Biden administration is also considering executive action to enact large-scale student loan forgiveness. No final decision has been made, but recent reports suggest the president could make a final decision by August.
Further Reading on Student Loans
Student loan pause: Biden officials hint at another extension, potentially tied to student loan forgiveness
560,000 borrowers will get automatic student loan forgiveness, but others can still apply for relief
Biden’s new student loan forgiveness changes could end up costing some borrowers
If Biden enacts a broad student loan waiver, it could look like this