Is More Student Loan Forgiveness On The Horizon?

It’s an election year, and President Biden has been touting every possible loan forgiveness headline his administration has made.

When the current administration's plan to forgive $10,000 to $20,000 in federal student debt per eligible borrower was squashed by the Supreme Court of the United States (SCOTUS) in 2023, many believed the dream of student loan forgiveness had reached a dead-end. However, plenty has gone in terms of loan forgiveness since then, particularly when it comes to borrowers who work in public service or repay their loans on income-driven plans.

For example, the Biden-Harris Administration announced they had approved the following types and amounts of forgiveness as of March 2024:

• $45.6 billion in student debt forgiven for 930,500 borrowers through improvements to income-driven repayment plans
• $22.5 billion in forgiveness for more than 1.3 million borrowers who were "cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements"
• $11.7 billion in loan forgiveness for almost 513,000 borrowers with a total and permanent disability
• $1.7 billion in federal loans forgiven for 29,700 borrowers through administrative adjustments to IDR payment counts

The administration also announced additional forgiveness of up to $6 billion for 78,000 public service workers after claiming to have also forgiven student debt for over 870,000 public service workers already. And that's after approving nearly $1.2 billion in student debt cancellation for almost 153,000 borrowers repaying loans on the Saving On a Valuable Education (SAVE) income-driven repayment plan.

Future Loan Forgiveness Plans

While these numbers are exciting to see for borrowers hoping to receive student loan forgiveness, it’s important to note that nearly all of the cancelled debt is the result of President Biden acting on existing loan forgiveness programs. One could argue that the President is simply doing his job in fulfilling the “executive” aspect of the Executive Branch - executing existing programs.

But some of this loan forgiveness is specifically the result of the Biden Administration, such as the SAVE plan. And he is doing more as well.

Attorney Jay Fleischman, Esq. of MoneyWise Law also says the forgiveness is far from over since the Biden administration is still processing one-time IDR account adjustments. According to the U.S. Department of Education, these payment count adjustments will ultimately help 3.6 million William D. Ford Federal Direct Loan (Direct Loan) Program borrowers achieve at least three years of credit toward having their loans forgiven, or potentially even have all their loans forgiven automatically.

While some of the forgiveness through this program is already complete, "more borrowers will receive additional time credit toward federal student loan forgiveness," he said.

Jerry Inglet, who serves as Senior Family Legacy Advisor at Wilmington Trust, also says the upcoming election cycle could play a role in other forgiveness initiatives announced in the coming year. It's also possible for additional rules regarding the forgiveness of debt for borrowers in dire financial situations to change. For example, Inglet says there seems to be momentum for federal student loan borrowers considering the inclusion of student loans within a bankruptcy.

"This option was so challenging in years past but there is a slow and upward trend of bankruptcies (that include student loan debt) that in some cases are getting partially or fully discharged," he said.

New Repayment Plans Unlock Even More Forgiveness

The Saving on a Valuable Education (SAVE) Plan for federal student loans has also made it so student loan forgiveness is a moot point for millions of borrowers. After all, this income-driven repayment plan makes it so it barely matters how much in federal student loans you borrow anymore.

Benefits of the SAVE plan include:

• Student loan forgiveness in as few as 10 years for borrowers who originally took out $12,000 or less in federal student loans
• An increased income exemption (from 175% to 225% of the federal poverty limit) to qualify for $0 monthly payments
• No accumulation of unpaid interest on federal student loans
• Monthly payments that are based on 5% of discretionary income for undergraduate student loans, leading to lower monthly payments than on other income-driven plans

This combination of benefits means many more borrowers will qualify for $0 monthly payments on federal student loans, and don't forget that this plan also offers forgiveness of remaining loan balances after payments have been made for 20 to 25 years (depending on whether you have undergraduate loans only, graduate school loans or both).

As an example, someone with a spouse and two children and a household income of $60,000 per year could pay $0 per month on their student loans through the SAVE plan, stick with the program for 20 to 25 years and have their remaining loan balances striked off the record completely after that time. This is true whether this person had $30,000 in student debt or $100,00+ in student loans. Since the SAVE plan bases monthly payments on income and family size, how much student debt a person has won't impact the final outcome.

The Bottom Line

More student loan forgiveness is definitely underway, both through various executive actions from the Biden administration and through IDR count adjustments and income-driven repayment plans.

Then, you have the continued loan forgiveness for borrowers working in public service through the Public Service Loan Forgiveness Program, and more borrowers from closed colleges should see their relief soon as well.

At the end of the day, there will be more student loan forgiveness for more borrowers - it just won’t come all at once.