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Three Student Loan Forgiveness Programs to Help You Deal with Debt

In recent months, the administration of US President Joe Biden has approved billions of dollars in student loan write-offs for hundreds of thousands of borrowers. And there may be more to come. What borrowers need to know Forbes.

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Some of these initiatives are temporary and only give borrowers a limited amount of time to apply or take advantage of the benefit before it ends. In many cases, borrowers may have to take action before a certain deadline to qualify for student loan revocation.

Student Debt Forgiveness Through PSLF Waiver

In October 2021, the Biden administration enacted a new fix for the Loan Forgiveness Program (PSLF). PSLF is a student loan write-off program that can pay off federal student loan debt for borrowers who have been employed for 10 years or more by a non-profit or government organization.

Under the PSLF program, contributions that would otherwise be ineligible, including payments made under ineligible repayment plans or on older FFEL loans, may be credited against the PSLF provided that the borrower has served in an eligible position in that time.

But the program is due to end on October 31, 2022 (advocates are urging the Biden administration to extend it, but there is no sign officials will do so).

How to implement the Limited PSLF Waiver initiative:
  • Read the Department of Education's detailed guide to the Limited PSLF Waiver on link;
  • for borrowers who already have direct federal student loans and have already verified their employment in the public service, no action may be required, as the Department of Education has indicated that it will automatically update borrowers' PSLF payment counts;
  • for borrowers who need to certify or re-certify their employment or verify that your employer is PSLF compliant, you can begin the process using the Department of Education's PSLF reference tool at link;
  • The Department of Education notes that borrowers with FFEL loans or Perkins loans will need to consolidate those loans through the federal direct consolidation program by October 31, 2022, in order to qualify for PSLF;
  • Borrowers can consolidate loans online through Department website. Note that the consolidation process can take a month or two, so don't wait until the last minute.

Borrowers with FFEL loans must first ensure that their employment meets PSLF requirements. If their employment is eligible, FFEL borrowers will need to consolidate these loans through the federal Direct Consolidation Program and then submit proof of employment to the PSLF.

Student loan forgiveness according to income adjustment

In April 2022, the Biden administration announced an initiative to expand assistance through income-based repayment (IDR) plans, which include plans such as income-based repayment (IBR) and Pay As You Earn (PAYE). Under IDR plans, borrowers can get forgiveness for any loan balance after 20 or 25 years (depending on the plan). But according to the original rules, only the time spent on repayment was taken into account.

On the subject: Seven Ways To Write Off Your Student Loan Debt

Under the new initiative, which the Biden administration is calling the "IDR adjustment," past loan periods can be credited towards maturity, including any repayment period as well as certain grace periods. Under this initiative, "any borrower with loans that have a maturity of at least 20 or 25 years will receive automatic forgiveness, even if you are not currently in an IDR plan," the Department of Education said in a statement.

How to participate in the program:
  • see the Department of Education's guidance on adjusting the IDR for link; note that the IDR adjustment will also benefit PSLF borrowers;
  • for borrowers who already have direct federal student loans, no action may be required as the agency has indicated that it will make IDR adjustments automatically and will begin publishing IDR tracking information this fall;
  • as with the Limited PSLF Waiver program, borrowers with FFEL loans will need to consolidate those loans under the federal Direct Consolidation Program in order to take advantage of the IDR adjustment. The Department of Education indicates that borrowers must do so "before these changes are completed, which is estimated to be no earlier than January 1, 2023";
  • Borrowers can consolidate loans online through Department website. Review the pros and cons of consolidation before proceeding. Note that the consolidation process can take a month or two, so don't wait until the last minute. As with the PSLF, the Department specifies that "any maturities prior to consolidation on consolidated loans" may be taken into account in the IDR adjustment.

Please note that the tax implications of student loan write-offs under IDR plans can be complex depending on when the student loan write-off occurs. If necessary, consult a qualified tax advisor.

Student Loan Forgiveness for Borrowers Misled by an Educational Institution

The Biden administration is working on two key initiatives under the Borrower Protection Program. Borrower Protection is a federal student loan cancellation program designed to address certain types of institutional misconduct.

Borrowers may apply for Borrower Protection Assistance if the university has made false promises or misrepresentations about critical aspects of their degree program, such as admissions, career prospects, or the ability to transfer loans.

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As a first initiative, the Biden administration announced earlier that it would write off federal student loan debt incurred by borrowers who attended Corinthian Colleges, a national chain of for-profit colleges that closed in 2015 following allegations of widespread misconduct. Everest College, Heald College, and Viotech were part of the network.

The Department of Education announced last week a proposed student loan settlement to resolve the decades-long Sweet v. DeVos lawsuit over stalled borrower protection applications.

Under the terms of the proposed agreement, which is still to be finalized and approved by the court, borrowers who have already applied for borrower protection and attended an educational institution, covered by insurance will receive forgiveness of their federal student loans.

What you need to know:
  • for borrowers who have attended Corinthian Colleges, no action is required. The Biden administration indicated that these borrowers would have their qualifying federal student loans canceled regardless of whether or not they applied;
  • in the proposed settlement in Sweet v. DeVos, borrowers who attended one of the more than 150 schools listed in the joint agreement and who filed for borrower protection by June 22, 2022, will receive a federal student loan cancellation after the proposed the settlement will be approved by the court;
  • Borrowers who have attended one of the schools covered by Sweet v. DeVos but have not yet filed for Borrower Protection may still apply before the settlement proposal is finalized. Such borrowers would not be eligible for automatic student loan cancellation, but under the proposed settlement, the Department of Education would be required to make a decision on these applications within 36 months;
  • It is important to note that borrowers who did not attend any of the schools covered by Sweet v. DeVos can still apply for borrower protection because the program itself does not expire.

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