More than 43 million Americans collectively owe over $1.7 trillion in federal and private student loans. The idea of the government forgiving federal student debt has gained significant attention in recent years, with both Donald Trump and Joe Biden having used emergency powers during the pandemic to ease the financial burden on college graduates. However, navigating the complex landscape of student loan forgiveness options has become increasingly challenging.
It’s crucial to understand that forgiveness generally applies only to federal loans, not private ones. However, with nearly 93 percent of all student debt being federal, it is essential to consider the government’s forgiveness opportunities.
President Biden has been actively involved in efforts to address student debt. In March 2020, President Trump paused loan repayments and interest due to the pandemic’s economic impact. President Biden has continued these efforts, providing relief to borrowers from various stages of life, from recent graduates to retirees. However, the uncertainty surrounding the longevity of these relief measures has left many borrowers in a state of financial limbo.
The state of student loan forgiveness is complex
Despite these efforts, legal challenges continue. Republican attorneys general have filed lawsuits to block the SAVE plan, although one such lawsuit recently faced a setback in Kansas.
For public servants, the Public Service Loan Forgiveness (PSLF) program remains a viable option, offering debt forgiveness after 120 monthly payments for those working in qualifying jobs. The Biden administration’s reforms have improved the program, leading to significant debt relief for many borrowers.
Borrowers can still apply for a onetime payment adjustment under a separate Education Department program, with an extended deadline of June 30. This adjustment could lead to debt cancellation or credits that lower balances. Consolidating student loans and enrolling in a government-run income-driven repayment plan can help borrowers achieve forgiveness more quickly.
While navigating these programs can be overwhelming, the potential benefits make the effort worthwhile. Ultimately, eliminating student debt can significantly improve borrowers’ financial stability, despite potential impacts on credit scores.
