Student Loan Forgiveness: Will Comments on Dept. of Ed Website Opposing Biden’s Plan Impact the Supreme Court’s Decision? (2023)

FAQs

What is the downside to student loan forgiveness? ›

Potentially the most significant drawback of student loan forgiveness is the taxes. With a few exceptions, including PSLF, the IRS considers the amount of your forgiven balance to be taxable income. Depending on how much is forgiven, that could amount to tens of thousands of dollars you owe in taxes.

The private loan debt relief will primarily go to borrowers who took out private subprime student loans (made to borrowers with low credit scores) through Navient's predecessor, Sallie Mae, between 2003 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021.

The answer: Yes! However, there are very specific eligibility requirements you must meet to qualify for loan forgiveness or receive help with repayment. Loan forgiveness means you don't have to pay back some or all of your loan.

With forbearance, you won't have to make a payment, or you can temporarily make a smaller payment. However, you probably won't be making any progress toward forgiveness or paying back your loan. As an alternative, consider income-driven repayment.

Student Loan Forgiveness is Unlikely to Impact Inflation Rates | Bankrate.

For personal economies, yes, student loan forgiveness is helpful. The larger economy is likely to see slight returns, if any, in the immediate future. There's not going to be an influx of new cash injected into the economy all at once, as these payments have already been paused for more than two years.

Your credit score might rise. For some people, student loan forgiveness could actually lead to a higher credit score. That's because eliminating up to $20,000 in debt could constitute a major decrease in your total debt balance, which accounts for 30% of your FICO score.

The refunded amount will reappear in your account as a loan balance. According to the Department of Education, all you need to do is contact your loan servicer to request the refund. Applications for loan forgiveness are expected to be available by mid-October.

How do I know if I am eligible for debt relief? To be eligible, your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households). If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief.

Forbearance periods of 12 consecutive months or greater, or 36 cumulative months or greater, will count towards loan forgiveness automatically.

Does payments in forbearance count towards forgiveness? ›

Late, partial and lump-sum payments will now be counted as forgiveness credit under PSLF as long as you're working for an eligible employer. Plus, specific months in periods of deferment or forbearance will also count.

Under the ongoing Covid-related forbearance, which has paused student loan payments since March 2020, the months of suspended payments can count towards student loan forgiveness under Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) as if payments were being made.

In most cases, only loans that are still collectible or were being reported to credit bureaus as of June 30, 2021, are eligible. If the loan is past the statute of limitations for the state Navient shows as your last known address, then it won't be eligible for cancelation.

How will I know if my private Navient loans are cancelled? Navient will notify all borrowers who are affected after the agreements receive final court approvals, according to the company.

But if you're still unsure about whether your student loan is federal or private, the best way to find out is by logging in to studentaid.gov with your FSA ID. All federal loan information is housed there. If you don't find your loan information through studentaid.gov, you have a private student loan.

Similarly, Mark Zandi, Moody's Analytics chief economist, says the effect on inflation is “largely a wash.” He estimates that student debt forgiveness starting at $10,000 will increase inflation by 0.08%, as measured by the consumer price index (CPI), another commonly used measure of inflation.

Some economists, like Harvard's Jason Furman and Lawrence H. Summers, both former top economic officials in Democratic presidential administrations, have warned that forgiving student debt will add to inflation. Their rationale: By reducing or eliminating future loan payments, consumers will have more money to spend.

The student debt cancellation and relief measures announced earlier this week by the Biden Administration would cost around $500 billion over a decade and would meaningfully boost inflation.

Forgiving debt of any amount is bad policy. It's unfair to people who have paid off their debt, to those who chose not to go to college, to people who went to college and now hold high-paying jobs, and it's unfair to future generations who will not have their debts forgiven.

“The net of these cross-currents is largely a wash.” Moody's estimates that the combined impact will reduce real GDP in 2023 by 0.05 percentage points, drive down unemployment by 0.02 percentage points and cut inflation by 0.03 percentage points.

Why did my credit score go down when my student loans were forgiven? ›

Any negative payment history may remain on your credit report. Whether student loan forgiveness completely wipes out your remaining student debt or just a portion of it, your payment history from those student loans will likely remain on your credit report.

And while it's always good to pay off your debts, paying off an installment loan can sometimes result in an initial dip in credit scores. Since that account is now closed and no longer active, its on-time payment history won't contribute as heavily to your scores.

Refund Checks Arrive for Student Loan Borrowers Who Paid During Pandemic. As part of the Covid-19 stimulus program, the government is sending money to those who made payments during the moratorium.

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

Can you refinance federal student loans? You can refinance student loans, but only with a private lender. You can't refinance student loans through the federal government. You can consolidate federal student loans, but federal consolidation won't lower your interest rate or save you money.

This process can take at least 90 days, but it could take longer.

Revised Pay As You Earn (REPAYE) works much the same way as Pay As You Earn. Under this plan, your payments will be capped at 10% of your discretionary income. Undergraduate loans are forgiven after 20 years, while graduate school loans are forgiven after 25 years.

Because you have to make 120 qualifying monthly payments, it will take at least 10 years before you can qualify for PSLF. Important: You must be working for a qualifying employer at the time you submit the form for forgiveness and at the time the remaining balance on your loan is forgiven.

The Education Department's new policy is that commercially-held FFEL loans will not be eligible for the $10,000 or $20,000 in student loan forgiveness, even if consolidated into a Direct loan, unless the borrower submitted an application to consolidate prior to September 29, 2022.

How many years is 120 payments? ›

The PSLF Program helps student loan borrowers working in nonprofit or government jobs by forgiving the remaining balance on your loans after you have made 10 years of qualifying payments (120 total monthly payments).

COVID-19 Emergency Relief and Federal Student Aid

If you're pursuing loan forgiveness, any period of deferment or forbearance likely will not count toward your forgiveness requirements. This means you'll stop making progress toward forgiveness until you resume repayment.

If you made payments after your 120th qualifying payment, those payments will be treated as overpayments and refunded to you.

Paused payments count toward PSLF and TEPSLF as long as you meet all other qualifications.

To actually get loan forgiveness, you have to make 120 “qualified” payments on your student loans. Qualified payments have to meet the following criteria: You were employed full-time by a qualified employer. Your loans were not in deferment, forbearance, or default. The payment was made after October 1, 2007.

Freddie Mac guidelines

Freddie Mac's guidelines for student loans are similar to Fannie Mae's, save for one key difference: If your loans are in forbearance or deferred, or your payment is otherwise documented as $0, your lender can factor in just 0.5 percent of your student loan balance to calculate your DTI.

The main difference: Forgiveness means you don't ever have to pay the loan back, and forbearance means you can delay paying back the loan.

If you qualify for forgiveness, cancellation, or discharge of the full amount of your loan, you are no longer obligated to make loan payments. If you qualify for forgiveness, cancellation, or discharge of only a portion of your loan, you are responsible for repaying the remaining balance.

For example, student loan cancellation could boost GDP by $174 billion and create up to 1.5 million jobs. 11. Wide-scale student loan forgiveness also helps student loan borrowers afford to get married, start a family, buy a home, save for retirement and start a business. 12.

If you have a large amount of student loan debt, then Public Service Loan Forgiveness (PSLF) could potentially save you thousands of dollars. It also might knock years off your student loan repayment timeline. You must meet all of the criteria to be eligible for college loan forgiveness, but the payoff can be worth it.

Do student loans expire after 20 years? ›

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

1. Check the top of your federal loan promissory notes, applications, and billing statements, as these state the name of the federal loan program at the top of the document. Federal loan programs include the William D.