US President Joe Biden announces student loan forgiveness relief on August 24, 2022, in the … [+]
The Biden administration has rolled out multiple student loan forgiveness initiatives, all of which are in various stages of implementation. For borrowers who have applied or who otherwise qualify, there may be wildly different timelines for receiving the relief.
Here’s what borrowers should know, and when to expect student loan forgiveness under these different initiatives.
The Limited Public Service Loan Forgiveness (PSLF) Waiver was a temporary initiative that relaxed the requirements for the PSLF program. PSLF can provide student loan forgiveness for federal loan borrowers working in nonprofit or government jobs. The initiative ended in October, and the administration has approved $24 billion in student loan forgiveness for 360,000 borrowers so far under the waiver.
But the Education Department and its contracted PSLF servicer, MOHELA, are still processing a backlog of PSLF applications. “We expect that it may take at least 90 business days for MOHELA to process [PSLF Employment Certification] forms, says the Education Department. But it can take even longer than that.
“Many factors impact processing times,” according to the Education Department, “including if your loans were with another servicer and require a transfer to MOHELA, if the [PSLF] form had any missing fields such as an employer’s EIN, the number of PSLF forms we receive, and if we are reviewing your employer’s eligibility, among other factors. Once the processing is complete, it will take additional time for the servicer to make adjustments to your payment counts and apply discharges.”
Borrowers should expect that the process may take up to six months, and in some cases, longer. But don’t worry — if you submitted your PSLF forms by October 31, and those forms are ultimately approved, you will get the benefits of the Limited PSLF Waiver.
Similar to the Limited PSLF Waiver, the IDR Account Adjustment is a one-time fix that will provide retroactive credit towards student loan forgiveness under Income Driven Repayment (IDR) plans. For borrowers who are working in public service jobs, they may also receive PSLF credit — effectively extending some of the benefits of the Limited PSLF Waiver that ended in October.
“Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years [under the IDR Account Adjustment] will see automatic forgiveness, even if you are not currently on an IDR plan,” according to the Education Department. These borrowers “will begin to see their loans forgiven [starting] in November 2022.” All other borrowers will see the benefits of the adjustment in July 2023.
Direct loan borrowers may receive the benefits of the IDR Account Adjustment automatically. But borrowers with commercially-held FFELP loans, Perkins loans, HEAL loans, or other non-Direct Loan federal student loans “should apply for a Direct Consolidation Loan by May 1, 2023, to get the full benefits of the one-time account adjustment,” says the Education Department.
The Borrower Defense to Repayment program can discharge federal student loan debt for borrowers who were defrauded by their schools. A similar program, called the Closed School Discharge program, can eliminate federal student loan debt in certain cases where a school closes and prevents a borrower from completing their degree.
The Education Department is in the process of implementing group discharges for borrowers who attended Corinthian Colleges, ITT Technical Institutes, and several other for-profit schools accused of misconduct. Progress is happening incrementally, but the Education Department recently notified eligible borrowers to expect the relief. Discharges will continue to be processed through 2023.
In addition, the Education Department will soon start to implement Borrower Defense discharges under the Sweet v. Cardona settlement, which will provide student loan forgiveness for borrowers who had already submitted Borrower Defense applications and attended an approved list of schools. “Within one year of the effective date of the settlement agreement—currently, January 17, 2023— class members will have their outstanding loans relating to these schools fully discharged, will receive refunds of any amounts they previously paid to the federal government toward those loans, and will have the credit tradeline associated with these loans deleted from their credit report,” according to the Project on Predatory Student Lending, the legal organization representing the class of borrowers.
Biden’s one-time student debt cancellation plan, which would have wiped out up to $20,000 in student loan debt for 40 million borrowers, has been blocked by federal courts. No one has received any relief, and the Education Department is unable to continue processing applications.
The Supreme Court is set to decide the fate of the loan forgiveness program next year, with a decision likely by June 2023. If the Court green-lights the program, the Education Department may be able to quickly start providing student loan forgiveness, likely within weeks of a ruling. But if the Supreme Court sides with challengers and prevents the program from being implemented, borrowers may not receive any relief at all. The Biden administration will then need to decide whether to implement an alternative program.
The Student Loan Pause Is Actually Leading To Loan Forgiveness — Are Further Extensions Coming?
Supreme Court Takes Next Big Step In Student Loan Forgiveness Cases
23,000 Student Loan Borrowers Will Get $19 Million To Resolve Debt Relief Fraud Claims
Court Approves $6 Billion In Student Loan Forgiveness For 200,000 Borrowers To Resolve Lawsuit