Student loans •
November 16, 2021
Biden Administration student loan forgiveness: What you need to know
Student loan relief is a key Biden Administration focus given the large debt burden borrowers face. Learn about Biden’s debt forgiveness proposals and actions.
Many college students and graduates have tens of thousands of dollars in student loan debt that they carry for years. So it’s natural if you’re worried about becoming part of this unfortunate statistic.
Numerous politicians have expressed their support or desire for easing this burden by canceling student debt. In fact, President Joe Biden made higher education and student loan forgiveness a crucial part of his presidential campaign.
The Biden Administration hasn’t laid out an official proposal yet, but it has set the stage for discussions of forgiving and canceling large amounts of student debt.
Below, we’ll cover what you need to know about Biden’s student loan forgiveness plans and how it could impact your current or future student loans. We’ll also go over some other ways you can seek temporary or permanent relief from student loans.
Biden’s student loan forgiveness plans and programs
Biden has proposed several forms of student debt relief—from broad cancelation to revised repayment plans to additional public service forgiveness.
There’s also a COVID-related forbearance, but that expires in January, 2022.
So, many students and student loan holders are looking to Biden to see if his administration or Congress will provide more relief or debt cancelation.
Let’s break down Biden’s proposed programs in more detail:
Increasing student loan forgiveness
On November 26, 2020, Biden gave a speech in which he promised to cancel $10,000 of federal student debt for any borrower.
His administration has consistently repeated its commitment to seeing this $10,000 cancelation happen during his time in office.
Some progressives in Congress are supporting a plan to boost the cancelation amount to $50,000 per person. This would completely get rid of student loan debt for a large number of borrowers, as the average student debt is $39,351.
Biden hasn’t advocated for this larger increase, but he stays committed to the $10,000 cancelation.
Depending on how he responds to pressure from the more progressive-leaning members of his party and republicans, an increase could happen.
Revising income-driven repayments
On the campaign trail, Biden stated that he wanted to make changes to income-driven repayment plans (where your student loan repayments are based on your income) to lessen the payment burden on borrowers with these plans.
Two of the biggest changes include setting monthly payments at $0 if you make $25,000 or less per year and setting repayment amounts at 5% of any discretionary income you earn over $25,000.
Currently, income-driven repayment plans range from 10–20% of discretionary income, depending on the plan you’re on.
This program change will automatically enroll all new and current borrowers if it comes into effect. But, you can opt out if you wish.
Anyone in this proposed plan with undergrad debt remaining after 20 years of repayment would have it all forgiven, tax-free.
Current plans forgive debt after 20–25 years but make the canceled debt taxable income—which can significantly increase your tax bill when the time comes.
So, a tax-free provision would help borrowers who qualify for the forgiveness avoid a large tax bill.
Unfortunately, only undergraduate loans would qualify this proposed plan—graduate loans would be ineligible for these new proposed rules.
Increasing Pell Grant funding
Pell Grants are additional funding sources provided to students who show financial need—typically those from low-income households. They don’t have to be repaid, except in rare circumstances.
Biden called for investing $85 billion into Pell Grant funding as part of his American Families Plan. Plus, Biden wants to raise the maximum possible Pell Grant award per person to cover more education costs.
Education Secretary Miguel Cardona also called for expanding Pell Grant eligibility so more students can seek free money instead of turning to student loan debt.
Providing free college tuition
Free college tuition has been a priority for the more progressive democrats for several years.
Biden proposed making tuition free in certain instances.
Here are some of his proposals:
Free tuition at 4-year colleges and universities for students whose families earn under $125,000 combined.
2 years of free tuition toward a degree or certificate if you attend a community college.
Grants to cover 2 years of tuition for students attending private, minority-serving institutions such as historically Black and tribal colleges and universities. The $125,000 rule applies here, too.
Strengthening borrower defense rules
Borrower defense rules help students get their loans forgiven when they discover the higher learning institution they planned to intend has defrauded or taken advantage of them.
A well-known example is ITT Technical Institute, which closed down in 2016 after filing for bankruptcy.
Many students paid to attend the institute only to find out their job prospects and earning potential were no better than before they enrolled. So they were left owing money for what was essentially a useless education.
The Trump administration put in place rules that limited students opportunities to wipe out this debt. But the new administration’s Department of Education (DOE) has since rolled these rules back.
Now there are more forgiveness opportunities for qualified borrowers who only received partial or no loan forgiveness during the Trump administration.
At this time, the Biden Administration only made it clear that this applies to borrowers with existing approved claims. They didn’t specify if it would also apply to new claims that are approved in the future.
Creating a new public service forgiveness program
The Public Service Loan Forgiveness program helps those who work for qualified employers in public service—such as government employees—seek loan forgiveness if they meet specific requirements.
However, PSLF has a high rejection rate, leaving many borrowers in public roles stuck with loans.
Biden wants to add a new public service forgiveness program to supplement this. It wouldn’t replace PSLF—although Biden wants to reform PSLF because of its high rejection rate.
The new forgiveness program would shorten the time it would take for public servants to have some loans forgiven. It would cancel up to $50,000 in debt for a qualifying public servant—$10,000 for each year you perform an eligible service, for up to 5 years.
A timeline of federal government action affecting student loans
Congress hasn’t yet passed any bills aiming to cancel student debt.
However, Biden and several democrats are working on potential solutions. In the meantime, they found ways to provide some relief during the pandemic.
They also gave additional help for specific groups, such as borrowers with disabilities or borrowers that institutions have defrauded.
Here is a timeline of important events that might impact your student loan situation:
Prior to inauguration: Biden’s transition team stated that Biden would prioritize $10,000 in cancelation for all borrowers by expediting a request to Congress.
January 20, 2021: Biden extended the COVID-related federal student loan forbearance through September 30, 2021. This forbearance temporarily lowers interest rates on federal loans to 0% and pauses all federal loan payments. Borrowers can continue paying if they want. Payments would go directly to the amount they owe without interest.
February 4, 2021: Senators Chuck Schumer (D-NY) and Elizabeth Warren (D-Mass) introduced a resolution calling on Biden to cancel up to $50,000 of student loan debt per borrower using executive action under the Higher Education Act. Press Secretary Jen Psaki restated Biden’s support for canceling student loan debt up to $10,000 per person but claimed the president’s team was still reviewing the steps Biden can take.
March 11, 2021: Biden signed the American Rescue Plan Act, a bill offering $1.9 trillion in total financial relief to help those impacted by COVID-19. The bill contains several parts aimed at making student loan cancelation more practical. This includes funds for educational agencies and higher education institutions, as well as tax-free student loan debt through December 31, 2025.
March 18, 2021: The DOE simplified the borrower defense relief process, helping more borrowers defrauded by higher learning institutions seek loan forgiveness.
March 29, 2021: The DOE waived Trump-era income monitoring requirements for about 190,000 borrowers with disabilities and canceled $1.3 billion in student loans for another 41,000 borrowers with disabilities.
April 28, 2021: Biden proposed the American Families Plan, which includes several plans for federal investments to make education more accessible and affordable.
June 16, 2021: The DOE signed off on student loan relief for around 18,000 borrowers who had attended the now-defunct ITT Technical Institute.
COVID-19 student loan forbearance
In March 2020, when US states were locking down due to COVID-19, Congress passed and President Donald Trump signed the CARES Act.
One part of the CARES Act placed a wide range of student loans into forbearance, including all of those owned by the DOE, through September 30, 2021.
This forbearance paused all student loan payments—although you could continue paying if you wanted to—and set interest rates to 0%. A 0% interest rate allows you to put each payment toward your principal balance.
It also paused wage garnishments and collections on federally-owned student loans.
Later, Trump extended the loan relief through January 31, 2021.
More recently, President Biden further extended the forbearance through September 30, 2021, and then again through January 31, 2022. We have yet to see if he’ll extend it again as we’re slowly moving out of the pandemic.
You don’t have to sign up for this forbearance—if you had any federal loans that qualified, you are or were automatically placed into forbearance.
This isn’t loan forgiveness. It simply pauses payments and interest. But, it offers financial relief for a lot of students, graduates, and their families as we recover from the pandemic.
You can use it to get ahead on loans if you’d like, but there’s no need to make any payments on relevant loans since you won’t accrue interest.
Frequently asked questions (FAQs)
Here are some questions you may have about Biden’s forgiveness plans or student loan relief and cancelation in general.
Did Biden say anything about private loan forgiveness?
All of Biden’s proposals deal with federal student loans. So far, there hasn’t been much talk about forgiving private student loans.
His administration is likely sympathetic to policies that could make dealing with private loans easier. In fact, Biden has expressed some support for easing the process of discharging student debt in bankruptcy.
Will Biden cancel loans via executive action?
Biden has expressed commitment to cancel at least $10,000 of student loan debt per borrower.
For much of his campaign and term so far, though, he has been hesitant about using executive action due to some potential legal complications.
Instead, he’s relied on Congress to send him a bill with cancelation in it, as it can be a more clear-cut way of making forgiveness happen.
That said, the Biden administration is still looking into the legalities of doing it via executive action.
Are there any other student debt forgiveness programs that exist?
Currently, there are several loan forgiveness programs, but they are only available for people who meet certain criteria or participate in specific repayment programs.
The most well-known is the PSLF (Public Service Loan Forgiveness program), as mentioned earlier.
Graduates in public service roles and enrolled in specific federal repayment plans can qualify for PSLF. After 120 qualifying payments, any remaining debt public service workers have that qualifies under the program can be forgiven.
The rejection rate is quite high, which has encouraged Biden to seek an expansion of the types of loans that qualify. He also wants to forgive half of qualifying borrowers’ balances within 5 years of using PSLF.
Aside from PSLF, most repayment plans have forgiveness provisions.
Various occupations, such as physicians, nurses, and teachers, also offer forgiveness and cancelation programs.
The Biden Administration has clearly made student debt one of its priorities. Biden has proposed a wide range of plans, from broad debt cancelation to new forgiveness programs to expanding funding and eligibility for grant programs.
But, it’s still early in Biden’s term. The government takes time to get things done, and some of Biden’s proposals may turn out a bit differently in the end—political parties often need to compromise, and priorities can change.
For now, check out Mos.com for more information about affording school and dealing with student debt.