Your federal student debts may be forgiven, canceled, or dismissed under certain circumstances. Find out what forms of forgiveness are available and whether you qualify based on your employment or other conditions.
Loan Forgiveness Explained
You are no longer needed to return some or all of your loan after it has been forgiven, canceled, or discharged. Use the links below to learn more.
What are the distinctions between forgiveness, cancellation, and discharge?
Although the terms forgiveness, cancellation, and discharge have similar meanings, they are employed in various ways. This is referred to as forgiveness or cancellation when you are no longer obligated to make payments on your debts due to your employment. Discharge occurs when you are no longer needed to make payments on your loans owing to unforeseen circumstances, such as total and permanent disability or the closing of the school where you acquired your loans.
It’s crucial to remember that you’re still responsible for repaying your loan regardless of whether you finish your school, get a job connected to your program of study, or are satisfied with the education you paid for with your loan. You are still accountable for repaying your loan even if you were a minor (under the age of 18) when you signed your promissory note or got the loan.
Forgiveness, Cancellation, and Discharge Types
The descriptions below provide a short overview of the numerous types of forgiveness, cancellation, and discharge options available for federal student loans.
Direct Loans are eligible for public service loan forgiveness.
If you work for the government or a non-profit, you may be eligible for loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program.
After you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an eligible company, PSLF forgives the remaining debt on your Direct Loans.
Find out more about the PSLF Program to discover whether you qualify.
Forgiveness of Teacher Loans
Direct and FFEL Program loans are both available.
If you teach full-time in a low-income elementary, secondary, or educational service agency for five academic years, you may be eligible for loan forgiveness of up to $17,500 on your Direct Loan or FFEL Program loans.
Learn more about the Teacher Loan Forgiveness Program, including qualifying conditions and application procedures.
Note that you may not be eligible for both Teacher Loan Forgiveness and Public Service Loan Forgiveness if you make the same qualifying payments or services for the same amount of time.
This restriction is temporarily waived for persons who have already received Teacher Loan Forgiveness under the restricted PSLF waiver. Find out more about the PSLF limited waiver.
Dismissal from school
Direct Loans, FFEL Program Loans, and Perkins Loans are all eligible.
You may be eligible for a federal student loan discharge if your school closes while you’re enrolled or shortly after you withdraw.
Learn about the procedures for being released from a closed school and how to apply.
Cancellation and Discharge of Perkins Loans
Only applicable to Federal Perkins Loans.
Based on your work or voluntary service, you may be able to have all or part of your Perkins Loan canceled or discharged (under certain conditions). This includes the cancellation of Perkins Loans for Teachers.
Find out if you’re eligible for Perkins Loan Cancellation and Discharge, as well as how to apply.
Discharge for Total and Permanent Disability
Direct Loans, FFEL Program Loans, and Perkins Loans are all eligible.
You may be eligible for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation if you are totally and permanently handicapped.
Learn more about the Total and Permanent Disability Discharge process, as well as the qualifications for eligibility and how to apply.
Direct Loans, FFEL Program Loans, and Perkins Loans are all eligible for discharge due to death.
Due to the death of the borrower or the student on whose behalf a PLUS loan was taken out, federal student loans will be discharged.
Learn more about death-related discharge and what documentation is required.
Bankruptcy Discharge (in rare cases)
Direct Loans, FFEL Program Loans, and Perkins Loans are all eligible.
After filing for bankruptcy, you may be able to get your federal student loans dismissed. However, a bankruptcy discharge is not an automatic process.
Learn about the steps to getting your federal student loans dismissed in bankruptcy.
For Direct Loans, Borrower Defense to Repayment is available.
If you took out the loans to attend a school and the school did or failed to do something relevant to your loan or the educational services that the loan was intended to pay for, you may be eligible for a discharge of your federal student loans based on borrower defense to repayment. The requirements for borrower defense to repayment discharge differ depending on when you took out your loan.
Learn about the borrower defense to repayment process, as well as the eligibility conditions and application process.
For Direct Loans and FFEL Program Loans, a False Certification Discharge is available.
If your school wrongly confirmed your eligibility for a loan, you may be eligible for a discharge of your federal student loan.
Find out if you qualify for false certification discharge and how to apply.
Discharge of Unpaid Refunds
Direct and FFEL Program loans are both available.
If you dropped out of school and the school failed to return loan funds to the loan servicer, you may be eligible for a discharge of the portion of your federal student loan(s) that was not returned.
To check if you qualify for the unpaid refund discharge, learn more about it.
Discharge for Forgery
Direct Loans, FFEL Program loans, and Federal Perkins Loans owned by the US Department of Education are all eligible.
Forgery is the intentional manufacture or alteration of a real written document with the goal to defraud. Identity theft victims are usually also forgeries victims.
If you feel you have been the victim of forgery, you may be eligible for a discharge of federal student loans taken out in your name fraudulently.
Find out more about the forgery discharge and check if you qualify.
Parent Borrowers’ Eligibility
A parent PLUS loan, like student loans, can be dismissed if you die, become totally and permanently incapacitated (not the student on whose behalf you received the loan), or if your loan is discharged in bankruptcy. If the child for whom you borrowed dies, your parent PLUS loan may be forgiven.
In addition, a Parent PLUS Loan may be discharged entirely or partially in any of the following circumstances:
Because the school closed, the student for whom you borrowed could not finish his or her program.
The school made a bogus certification of your loan eligibility.
Because of identity theft, your loan eligibility was falsely confirmed.
The student dropped out of school, but the institution failed to issue a return of your loan funds as required by law.
For further information, contact your loan servicer.
How to Request Forgiveness
If you believe you qualify, contact your loan servicer. If you have a Perkins Loan, you should contact the school that issued it or the loan servicer approved by the institution.
During the Application Review Period, Loan Payments
You may be required to make payments while your application is being reviewed, depending on the sort of forgiveness, cancellation, or discharge you’re seeking. If you must continue making payments during the application review period, check with your loan servicer.
My application has been accepted.
You are no longer compelled to make loan installments if you qualify for full forgiveness, cancellation, or discharge of your loan. If you are only eligible for forgiveness, cancellation, or discharge of a portion of your loan, you must return the remaining sum.
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If you qualify for certain types of loan discharges, you may also receive a refund of some or all of your loan payments, as well as any negative information about your loan delinquency or default being removed from your credit report. If the loan was in default before the discharge, the default status may be removed. You would recover federal student assistance eligibility if you had no other defaulted loans.
My application was turned down.
If your application is turned down, you will still be liable for repaying the debt according to the terms of the promissory note you signed. If you have a Direct Loan or an FFEL Program loan, talk to your loan servicer about your repayment choices. Examine your choices for repayment.
If your loan has gone into default, go to Getting Out of Default to learn how to start repaying it and what choices you have for getting out of default.
Contact your loan servicer for more information if you believe your application was denied in error.
WASHINGTON— Senators Mitt Romney (R-UT), Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, Tim Scott (R-SC), Bill Cassidy, M.D. (R-LA), and Thom Tillis (R-NC) today introduced the Student Loan Accountability Act, legislation that would prevent the Biden Administration from canceling student loan debt at the expense of millions of Americans who chose not to go to college or worked diligently to pay off any student loan debt.
$1.7 trillion to the national debt
Despite bipartisan resistance and questionable legal authority, the White House continues to discuss canceling student loans publicly. If the White House goes ahead with this plan, it will add $1.7 trillion to the national debt, fuelling inflation even more. It would also unfairly punish Americans who considered financial factors such as affordability while deciding on higher education.
“The Biden Administration’s decision to cancel roughly $2 trillion in student loan debt makes no sense. “Not only would this choice be unfair to people who have already returned their loans or chosen to pursue alternate education pathways, but it would also be grossly inflationary at a time when inflation is already historic,” Senator Romney stated. “Both Democrats and Republicans have urged President Obama not to take this foolish move and add to our $30 trillion national debt. And, while the President’s legal ability to forgive this obligation is questionable at best, our law would bar him from doing so.”
“Working Americans are struggling to purchase basic necessities like petrol and groceries due to the greatest inflation in 40 years,” Senator Burr said. “But that won’t stop the Biden Administration from pushing further inflationary policies that solely favor the highest earners.” “Taxpayers who did not pursue higher education or appropriately repay their student loans should not be on the hook for those who did.” Not only is that clearly unfair, but it also fails to address the underlying issue. Unconditionally canceling student loan debt will simply encourage colleges and universities to raise tuition and future borrowers to take up even riskier loans. The Student Loan Accountability Act must be passed by Congress to make it plain that the Administration’s legally problematic and demonstrably destructive approach cannot stand.”
“Prices are continuing to rise, owing in part to government spending.
Senator Scott stated, “Cancelling trillions of dollars in student debt will simply aggravate inflation and further damage the very people this administration purports to be fighting for.” “It’s beyond time for President Biden to take our economy seriously, and he can start by scrapping this blunder.”
“Why should a woman who is struggling to make ends meet have her tax dollars go to a lawyer?” Dr. Cassidy asked. “President Biden’s plan is completely unjust to the typical American who opts out of college.”
Senator Tillis stated, “President Biden’s shortsighted and poorly targeted plan to cancel student loan payments will only harm Americans, especially those who have already paid off their debts or decided not to seek higher education.” “Rather, we must address the core causes of growing higher education costs, and I am delighted to submit this legislation alongside my colleagues to hold President Biden accountable and prevent him from causing further irreversible harm.”
Student loan debt cancellation’s real impact:
According to the Committee for a Responsible Federal Budget, increases inflation rates are between 4% and 20%, forcing millions of households who do not have student loan debt to face higher inflation.
According to a Brookings Institution report, approximately one-third of all student debt is held by the wealthiest 20% of the population, while just 8% is owned by the poorest 20%.
Increases the incentive for schools and institutions to increase tuition.
After prolonging the student loan payments halt, the Biden Administration’s national debt balloon grows by $5 billion per month, on top of roughly $100 billion already added in FY2020 and FY2021.
Inhabitants of Washington, DC are rewarded more than residents of any other city because their average borrower owes about $55,000, the highest in the country.
The Student Loan Accountability Act operates as follows:
The Departments of Education, Justice, and Treasury are prohibited from taking any action to cancel or forgive outstanding balances, or sections of balances, on covered loans.
Existing targeted federal student debt forgiveness, cancellation, or repayment schemes, such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness programs, are exempted under the Higher Education Act.
The president was due to meet with New York Democrat Senate Majority Leader Chuck Schumer, Georgia Democratic Senator Raphael Warnock, and Massachusetts Democratic Senator Elizabeth Warren. On Wednesday afternoon, Schumer and Warren were seen arriving at the White House.
When questioned about a possible meeting with Warnock,
White House press secretary Karine Jean-Pierre said Biden has not made a decision on student debt forgiveness, but that the president “appreciates” the viewpoints of senators working on the subject and “looks forward to the discussion this afternoon.”
Biden indicated late last month that he was “considering dealing with some debt reduction” and would respond “in the next couple of weeks.”
Biden has been pressed to follow through on a campaign commitment to address student loan debt. At a White House meeting last month, he indicated that he would take action to address the issue.
Biden has made various steps to reduce student loan debt since becoming in office. He’s repeatedly extended a moratorium on federal student loan repayments, which was first implemented during the Trump administration to assist borrowers who were experiencing financial hardship as a result of the outbreak. The White House just stated that the halt would be extended until August 31.
According to California Democratic Rep.
Nanette Barragán, Biden looked “enthusiastic” about the concept of erasing at least $10,000 in student loan debt during a meeting with members of the Congressional Hispanic Caucus in April but did not offer a firm commitment.
Biden and Democrats addressed the scope of such a plan, including whether it would encompass public and private institutions, according to CNN’s Barragán, but the White House made no commitment or set a timeline for taking such action. Her comments on the subject came after reports that Biden said during the meeting that he would use executive authority to address the issue. “It was news to me” that Biden had relayed a decision during the CHC meeting, Barragán added.
Some prominent Democrats, including Schumer and Warren, have urged Biden to forgive up to $50,000 in student loan debt per borrower. Biden has stated that he will not consider that figure.
“I’m thinking about getting rid of some debt. I’m not thinking about lowering my debt by $50,000 “In April, Biden stated at the White House after announcing extra financing for Ukraine.
The White House has long stated that the president would support congressional action to eliminate $10,000 in student loan debt forgiveness for borrowers. Still, Biden has not stated whether he would utilize executive authority to grant that debt relief immediately. However, with Democrats holding a narrow majority in Congress, it’s improbable that legislation erasing debt in its entirety will pass.
Are Student Loans Going to Be Cancelled? Our Position
Since President Joe Biden vowed to forgive $10,000 per borrower on the campaign trail, federal student loan debtors have already been wondering about debt cancellation.
Although Biden has expressed support for comprehensive student loan forgiveness, he has yet to present a particular proposal or quantity since becoming president. Biden might urge Congress to adopt a measure canceling debt, or he could exercise executive authority pending legal determination.
The White House has given several hints about its plans, but has given no schedule for an announcement other than “in the coming weeks.”
So far, Biden has helped borrowers.
The White House has prolonged President Donald Trump’s broad, zero-interest loan payment moratorium. Forbearance on federal student loans is set to expire on August 31.
Most borrowers will have gone over two years without making a payment by then. However, unless the White House eliminates some of the debt, most federal student loan borrowers will begin making monthly payments on the same outstanding balance they had when the crisis began.
MORE: What is being done about student loan forgiveness?
Since the start of Biden’s administration, the Department of Education has altered existing loan forgiveness programs, estimating that $18.5 billion in loans have been canceled for over 725,000 students.
The White House has also revealed plans to clear the slate for over 7 million borrowers who have defaulted on their student loans, which could result in the confiscation of tax refunds and Social Security benefits, as well as long-term credit ramifications.
Borrowers should not anticipate that their student loans will be erased in full as the debate over student loan forgiveness continues.
Biden’s position on debt cancellation
Biden has been pushed by members of Congress to eliminate $50,000 in debt per borrower. However, the president has stated that if he uses his ability to erase large amounts of debt, it will not exceed $10,000 per borrower.
He said at a press conference on April 28: “I’m thinking of dealing with some debt reduction, but not $50,000 in debt reduction. But I’m in the process of determining whether or not there will be additional debt forgiveness, and I’ll have an answer in the next few weeks.”
On May 3, White House spokeswoman Jen Psaki said that Biden was exploring debt relief for debtors earning less than $125,000 per year, reinforcing suspicions that any debt cancellation would be targeted.
Broad student loan forgiveness was not included in Biden’s budget proposal for 2022. During his presidential campaign, he suggested forgiveness in the following situations:
If you went to a public university or college. Private historically Black colleges and universities, as well as other minority-serving institutions, would be eligible as well.
If you used the loans to pay for college.
If your annual income is less than $125,000. The phaseout of this benefit was mentioned in Biden’s plan, but no further specifics were provided.
There is no information regarding which loans might be canceled because there is no formal forgiveness proposal.
Arguments in favor of student debt forgiveness
Borrowers have had to postpone their lives due to student debt. Student debt is inhibiting borrowers from making big financial decisions, such as starting businesses and buying homes, as well as getting married and having children, according to proponents of debt cancellation.
Not all borrowers have advanced degrees that increase their earning potential. According to Brookings, persons with debt and no degree are four times more likely to default than those with a degree. According to the National Center for Education Statistics, 41.8 percent of students who started college in 2011-12 took out student loans. Only 59 percent had completed their bachelor’s degree six years later. Borrowers without a degree are not eligible for the higher lifetime earnings that are associated with college completion.
The cancellation of student debt could help address the racial wealth divide. Data demonstrates that a lack of family wealth causes many Black and Hispanic families to rely more heavily on student loans to pay for education. After graduation, injustices persist: Black and Hispanic graduates earn less than other graduates, making them more likely to default on their loans.
Arguments in favor of student debt cancellation
The cancellation of student debt is intrinsically unjust. Critics claim that student debt cancellation would not assist individuals who did not attend college or who had previously paid off their student loans. Critics contend that canceling the program will help only the 13% of the population who attend college and that it is unneeded because people with college degrees earn more.
Student debt forgiveness on a large scale is regressive. According to a Brookings Institution research published in January 2022, the cancellation would disproportionately benefit rich student loan debtors, who are more likely to have attended graduate school. Higher incomes are usually associated with advanced degrees.
A one-time cancellation will not fix the student debt crisis of the future. According to projections from the Committee for a Responsible Federal Budget, a right-center public policy organization, if all student debt were removed, overall debt would revert to current levels by 2035. Overall debt would rise to current levels by 2025 if $10,000 in debt per borrower was erased.
How the elimination of student debt may affect borrowers
Broad student loan forgiveness might affect 45.7 million borrowers who owe the government $1.61 trillion in federal student loans. Taking away $10,000 from each person, as Biden proposed during his campaign, would result in a total loss of $457 billion.
Here’s how that might affect borrowers with large amounts of debt:
A fresh start for 15.2 million borrowers. With $10,000 in debt cancellation, over a third of federal borrowers might see their amounts drop to zero. According to federal data, 7.8 million owe less than $5,000 in student loans, while 7.4 million owe between $5,000 and $10,000.
According to a June 2019 examination of federal data by The Institute for College Access and Success, more than half of borrowers who default have less than $10,000 in federal undergraduate debt.
Because people with lower debt levels are more likely to have not completed their education, they miss out on the benefits of a degree that leads to a higher-paying employment. According to TICAS, 49% of students who defaulted did not finish their program of study.
Some breathing room for 18.9 million borrowers. According to official figures, about 19 million borrowers owe between $10,000 and $40,000 in federal student loans. These debtors face a lot of possible outcomes from broad student loan forgiveness if they don’t have a comprehensive execution strategy. For example, canceling their subscription may not cut the amount they pay each month, but it may bring their end date closer and reduce the total amount they spend owing to interest. Alternatively, it may fully eliminate one loan while leaving payments on others unaffected.
A drop in the bucket for 11.6 million debtors. Households with a lot of school debt are more likely to acquire advanced degrees and earn more money. More than 8 million people owe the government college debts ranging from $40,000 to $100,000. According to data, another 3.3 million borrowers owe more than $100,000 on their federal loans. If $10,000 was forgiven, a borrower repaying $100,000 on the regular government 10-year plan at 5% interest would pay off the debts 15 months sooner.
We’re also keeping an eye on financial aid and student debt.
Policy proposals are being developed.
Increases in Pell Grants
The Pell Grant maximum is increased by $400 in the federal budget for 2022-23, increasing the annual ceiling to $6,895.
Some colleges provide free or reduced tuition.
The college will become more inexpensive for students at private and public historically Black colleges and universities, tribal colleges and universities, and other minority-serving institutions, or MSIs, under Biden’s campaign pledge. Biden also advocated for two years of free community college tuition and fees toward a degree or certificate, but that provision was dropped from the House’s November budget bill, which now awaits Senate approval.
Income-driven repayment has been revised, as has Public Service Loan Forgiveness.
During his candidacy, Biden supported restricting IDR plans to undergraduate loans, capping payments at 5% of income, not taxing the forgiven loan amount, and enrolling every federal student loan borrower in an IDR plan automatically.
Biden ran on a plan to create a new student loan forgiveness program for borrowers who perform public service. Up to $50,000 might be erased under this idea; $10,000 of your debt would be automatically canceled for each year you provide eligible service, up to a total of five years. PSLF would not be replaced.
Interest on student loans was waived
Biden was urged by a group of Democratic senators to eliminate interest on federal student loans for the duration of the pandemic. According to a letter written to Biden by a group of senators on Dec. 6, interest has been suspended throughout the current deferral, saving borrowers an additional $5 billion each month.
Colleges should be more transparent about their costs and results.
The College Transparency Act adds on the College Scorecard data currently accessible. It would create a data system that would track college enrollment, progress, completion, and postgraduate outcomes, as well as higher education expenditures and financial aid.
Some of the tight criteria for getting student loans erased in bankruptcy may be loosening, according to recent court opinions. Because debtors must establish their debt causes “undue hardship” (known as the “Brunner test”), student loan discharge through bankruptcy is difficult. Private student loan borrowers occasionally succeed, while federal student loan borrowers almost never do.
In February, the Department of Education announced that it would drop its appeal of a bankruptcy ruling that discharged $100,000 in student loans for a man whose medical condition made it difficult for him to work and repay his debt. The Department of Justice has also stated that it is reconsidering bankruptcy laws.
MORE: Is it Getting Easier to Forgive Private Student Loans?
What else is coming?
PSLF gets a second chance
There’s also a Public Service Debt Forgiveness limited waiver available until Oct. 31 that would eliminate some of the red tape that led to high denial rates for loan forgiveness under the program – at least for the next year.
PSLF will be available for a greater range of loan types and repayment plans under the restricted waiver, including past FFEL or Perkins loan payments, late payments, and payments made on previously non-qualifying repayment plans. Additionally, any time spent on active duty by members of the military with federal student loans will count toward PSLF, regardless of whether payments were made during that time.
To qualify for the limited waiver, borrowers must consolidate their loans into a direct loan and complete a PSLF form by Oct. 31.
The Education Department anticipates that 22,000 borrowers will be automatically eligible for loan discharge as a result of the restricted waiver, with another 27,000 potentially eligible if they certify their employment history. Over $4.5 billion in loans could be erased as a result of this.
The Consumer Financial Protection Bureau announced on February 18 that it would increase its scrutiny of how servicers are applying the waiver. “Servicers made false claims to borrowers regarding their ability to become eligible for PSLF,” the bureau said. You can file a complaint with the Consumer Financial Protection Bureau if you’re having trouble getting the aid you need from your servicer.
PSLF applications are being reconsidered.
Borrowers who were denied PSLF or Temporary Expanded PSLF can request a reconsideration online at studentaid.gov beginning April 2022. Anyone can submit a request for their application to be reconsidered.
To certify employment or payment determinations, you’ll be able to file one or more reconsideration requests for your application. You will not be required to supply further paperwork with your request, but you may be required to do so once it has been reviewed. There was no time limit specified.
You must still meet the law’s payment and employment criteria, including the present waiver, which counts previously ineligible payments.
You can utilize the PSLF Help Tool to see if your employer needs to evaluate your situation. If your employer isn’t eligible, consider submitting documents explaining why your not-for-profit organization should be.
Federal Student Aid did not specify how long each application would be reviewed. Make sure your contact information on studentaid.gov is up to current so you may receive correspondence. The student aid website has more information about payment count reconsideration and employer eligibility.
Student loan services that are simplified
On Dec. 13, Biden issued an executive order requiring numerous government agencies, including the Department of Education, to make improvements to improve government service delivery. Borrowers might expect the following modifications when details emerge:
A single payment gateway. Borrowers of direct student loans will be able to apply for, manage, and repay their loans using a single website: studentaid.gov. Anyone applying for federal student aid, including loans, must create an FSA ID to access their account. While servicers will continue to manage loans, borrowers can now make payments through the studentaid.gov website.
A simplified application for Public Service Loan Forgiveness. Borrowers with federal student loans who are qualified for loan forgiveness can apply with less paperwork or without having to fill out documents that they have already completed. The specifics of this expedited application process have yet to be determined.
Other advantages and services are recommended. Students and student loan borrowers can learn about benefits and services that they may be eligible for, such as health-care subsidies, broadband internet service help, and food assistance. It’s unclear how these suggestions will be communicated.
Changes in student debt servicers
Student loan servicers, the commercial corporations that oversee federal student loans, are undergoing changes. Navient, GSMR, and Cornerstone are among the federal student loan servicers who have exited the market, while FedLoan’s contract expires in December 2022. That means your loans may be transferred. MOHELA, Aidvantage (previously Navient), Edfinancial, and Nelnet are among the loan servicers that will take on the FedLoan portfolio. However, the PSLF program will be managed solely by MOHELA.
If you don’t know who your loan servicer is, go to studentaid.gov to find out. Call 1-800-4-FED-AID to reach any of the loan servicer contact centers.
Payments will resume on September 1st.
The current forbearance period will conclude on August 31. Borrowers with federal student loans should start making arrangements as soon as possible to ensure that they are ready when payments resume in September.
MORE: The moratorium on student loan payments will be extended until September 1.
Unless your financial circumstances changes, there is no need to discontinue paying your loans if you have been doing so during the forbearance period. Consider making payments now if you haven’t been paying since forbearance began but can afford to do so to save money on interest and help pay off your loans faster.
When the forbearance period ends, those who owed interest at the start will have that interest capitalized, or added to the amount owed on the loans. However, any payments made before that date will be applied to accrued interest rather than principal, so paying down the accrued interest now can save you money on interest later.
If you’re not sure if you’ll be able to afford your student loan payments come September 1, consider putting money aside now to see if you can fit it into your budget.
All collection operations on federal student loans in default through the Treasury offset program are halted until the payment stop expires, including withholding of 2021 tax refunds, the child tax credit, or Social Security payments.
Contact your servicer ahead of September 1 to explore income-driven repayment arrangements if you’re having problems setting aside your payment or know you’ll have trouble paying your loans when payments resume.
Payments will be limited to a fraction of your income, and your payment period will be extended. If you contact your servicer before September 1, you’ll be prepared with a payment plan that works for your income when your payments resume.
MORE: Student loan repayment plans often promise forgiveness, but they rarely deliver
According to the Education Department, you can temporarily self-report income when qualifying for or recertifying an income-driven repayment plan until February 28, 2023. This means that when you submit an IDR application online, you don’t have to include any tax documentation. Borrowers can also self-certify via phone, according to the Student Loan Servicing Alliance.
Borrowers who have issues regarding their loans or who are in unusual circumstances should contact their servicer before September to guarantee a smooth payment resume.
For defaulted student loan holders, a new beginning
All federal loan debtors in delinquency or default will get a “new start” when payments resume, the education department stated April 6 as part of the pause extension. This means that these borrowers will be eligible for income-driven repayment plans, Public Service Loan Forgiveness, and will no longer be subject to collection costs or other default repercussions.
Nearly 8 million borrowers who defaulted on their loans will be able to re-enter payments in good standing, but it’s unclear how the agency hopes to prevent them from defaulting again. A federal student loan defaults after 270 days without payment.
Some important details have still to be revealed, such as:
• Whether or not payment would revert to the previous amount.
• How will the erasure of defaults affect credit reports?
• The due date for the concerned borrowers’ first payment.
Repayments based on income
The Department of Education stated on April 19 that millions of borrowers will benefit from one-time modifications that count past payments toward the 240 or 300 required to qualify for income-driven repayment forgiveness. Through Public Service Loan Forgiveness, the improvements are expected to wipe out debt for at least 40,000 borrowers.
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When borrowers go into their accounts on StudentAid.gov in 2023, federal student aid will begin displaying income-driven repayment payment counts. In the future, the federal student assistance administration aims to allow other loan statuses to count toward income-driven payback forgiveness, including as deferments and forbearances. It is unknown when the modifications will take effect or whose loan statuses will be affected.