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Beginning in February, certain student loan borrowers who have spent a decade in repayment will get their federal student loan debt forgiven, the Biden administration recently announced.
Most borrowers need to make payments for 20 years or 25 years on an income-driven repayment plan before their debt is erased. But under the U.S. Department of Education’s new repayment program, called the Saving on a Valuable Education, or SAVE, plan, those who took out $12,000 or less will get their debt erased after just a decade.
The Education Dept. gives federal student loan borrowers several options to pause their payments.
Due to the timeline of regulatory changes, borrowers may have to wait for some of these periods to be credited to their forgiveness timeline under the SAVE plan. And some of these stretches may only start counting after July.
But it seems that forbearances could qualify toward forgiveness: Either 12 consecutive months in a forbearance, or 36 cumulative months, an Education Dept. spokesperson told CNBC. Time spent in an economic hardship deferment, and other deferments, like the deferments for cancer and unemployment, may also get you credit, depending on when you were enrolled.
You should also eventually get credit for time spent in repayment before a loan consolidation.
The Education Dept. added that borrowers, in time, can make “buyback” payments to get credit for any periods in deferments or forbearances that didn’t count toward forgiveness.
But the spokesperson said that option hasn’t been implemented yet. “We will provide more detail on it when it is going live,” they said.
If your calculated payment under SAVE is currently $0, “the cost to the borrower for the buyback will be zero, letting them get all the other deferments and forbearances covered at no additional cost,” Kantrowitz said. “It’s a pretty sweet deal.”
