Forgiveness, Forbearance and Other Student Loan Changes to Know

Be proactive to get ahead of major federal student loan changes.
Eliza Haverstock
By Eliza Haverstock 
Updated
Edited by Karen Gaudette Brewer

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Politics and a pandemic have shoved stodgy student loans into the spotlight. Since 2020, borrowers have encountered an onslaught of changes to the federal student loan landscape, including more than three years of paused payments and a repayment plan overhaul.

Backtracked announcements and timeline changes have made it difficult for borrowers to keep up with where things stand. Here’s what you need to know and how to prepare for what comes next.

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Supreme Court blocks student debt cancellation

President Joe Biden's one-time proposal to erase up to $20,000 in federal student loans was struck down by the Supreme Court on June 30, 2023. The plan, enacted under the 2003 HEROES Act, was deemed unconstitutional by a 6-3 majority. The relief plan was estimated to impact more than 40 million eligible borrowers.

But the administration's efforts are not done. President Biden is planning to pursue student debt cancellation through an alternate route, the Higher Education Act. Established in 1965, this legislation allows the secretary of education to “compromise, waive, or release” federal student loans.

The secretary of education has already taken steps to enact Plan B, but specific details and timing are still to come.

What you can do about it: The three-year federal student loan payment pause is ending soon. Borrowers should prepare to start making payments on their full balance in October.

If you foresee issues affording your payment, reach out to your federal student loan servicer as early as possible. As an additional safety net, the Department of Education also announced a 12-month student loan on-ramp where missed payments will not be placed in default or delinquency. They also will not be reported to credit bureaus or collection agencies.

Payments resume in October

After more than three years of an interest-free federal payment pause, known as forbearance, Congress has now required that student loan payments will resume in October. Interest began accruing on Sept. 1.

You can't depend on another payment pause extension. Due to a provision in the debt ceiling deal passed by Congress in June, no further payment pauses are permitted.

Forbearance started in March 2020, as the pandemic began sweeping the U.S.

What you can do about it: Borrowers should prepare for bills to resume by reaching out to your student loan servicer if you’re not sure what to expect.

If you aren't sure who your servicer is, find out by logging into your account dashboard at studentaid.gov or by calling the Federal Student Aid Information Center. And contact your servicer early, as there may be lengthy hold times and delayed responses.

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Other loan forgiveness pathways expanded

After the Supreme Court announced its ruling, the Biden administration immediately announced changes that would affect income-driven repayment (IDR) plans and loan forgiveness measures. IDR plans base borrowers' payments on their discretionary incomes and household size, and borrowers can qualify for loan forgiveness if they have a balance at the end of their loan term.

IDR account adjustment, or waiver

In April 2022, the Education Department announced an IDR and Public Service Loan Forgiveness, or PSLF, one-time account adjustment — also called the IDR waiver — that will move millions of borrowers closer to the student loan forgiveness finish line.

Previously, there were circumstances where certain payments weren't counted as qualifying payments for the purposes of loan forgiveness. But in a one-time adjustment, the government will change what payments are credited, helping borrowers get closer to loan forgiveness.

On July 14, the first group of eligible borrowers received an email that they qualified for loan forgiveness after making 20 years of payments. That amounted to nearly $39 billion of debt erased.

The Education Department will continue to identify and notify borrowers that meet the requirements for loan forgiveness after making 240 or 300 months' worth of qualifying payments, depending on the type of loans and repayment plan they're on.

For PSLF, those adjustments will also count those payments toward the 120 required for loan forgiveness. The number of qualifying payments will show up on your account dashboard.

Millions of borrowers will receive at least three years of additional credit toward forgiveness under an IDR plan or PSLF when their accounts are updated in 2024.

If you’ve been in repayment for at least 20 or 25 years (including forbearance time), you’ll be free of student debt after the adjustment. If you qualify for PSLF, you’ll be debt-free if 10 years have passed.

What you can do about it: The recount is largely automatic — but if you have commercially held Federal Family Education Loan (FFEL) Program, Perkins or Health Education Assistance Loan (HEAL) Program loans, you must apply to consolidate them at StudentAid.gov by the end of 2023 to get the full benefits. Get started soon because the consolidation process can take time.

Even if you weren’t enrolled in an IDR plan before the pandemic payment pause, you’ll still see the adjustment applied to your account. But if you have a balance remaining after the adjustment, you will need to sign up for an IDR plan once payments resume to keep building credit toward loan forgiveness. Borrowers can call their servicers and submit paperwork today so they'll be all set to go into an IDR plan as soon as forbearance ends.

A new IDR plan

The popular income-driven REPAYE plan is being replaced by a new, generous plan called Saving on A Valuable Education, or SAVE that will halve monthly payments for many borrowers with undergraduate loans and help some reach loan forgiveness more quickly. Students who originally borrowed less than $12,000 would see their remaining balances wiped away after 10 years of payments, instead of the 20 or 25 years under existing IDR plans.

Borrowers can sign up for this new plan before payments resume in October, though not all features of the plan will be available then. Final rollout is slated for July 2024.

What you can do about it: Borrowers already enrolled in the REPAYE plan are automatically being moved into the SAVE plan this fall. You can directly apply to SAVE on StudentAid.gov.

Student loan servicer switches

The company that manages your student loans could change in the next couple of years. In April, the Education Department signed contracts with five federal student loan servicers. The new contracts are slated to go live sometime in 2024, but legacy contracts will last through December 2024 to smooth the servicer transition. Effects may be limited: Only one new servicer is entering the arena, and one — OSLA — is leaving.

Eventually, the overhaul will also include the launch of a central servicer portal at StudentAid.gov. The portal is intended to lead to more customer service accountability and prevent borrowers from having to navigate servicer-specific websites.

What you can do about it: Make sure your contact information is up to date with your current servicer, and download a copy of your payment history. You don’t need to do anything else at this point.

If the Department of Education transfers your loans to another servicer, your current servicer and your new one will notify you by mail, email or phone. From that point on, you’ll make monthly payments with the new servicer, and you may need to set up any auto-pay or biweekly payments again. Most servicers deliver the same options, but customer service may differ among them.

Other key student loan changes underway

  • "Fresh Start" program for delinquent or defaulted loans. People with past-due federal student loans now have a second chance to get them back into good standing, thanks to the government’s temporary "Fresh Start" program. It includes a bevy of benefits, like restored access to IDR plans. Eligible borrowers will need to sign up for Fresh Start within one year of forbearance ending to enjoy its full relief. You can sign up on myeddebt.ed.gov or by calling the Education Department at 800-621-3115.

  • Bankruptcy guidance. The departments of Education and Justice jointly released updated bankruptcy guidance in November 2022, meant to standardize the requirements for borrowers to discharge their federal student loans in bankruptcy. Local bankruptcy judges will still make final calls case by case. Contact a bankruptcy attorney to see whether this is a good option for you.

  • Breaking up consolidated spousal loans. In October 2022, Congress passed the Joint Consolidation Loan Separation Act, which will allow borrowers who previously consolidated their student loans with a spouse — through a program that ran from 1993 until 2006 — to separate them and access debt relief programs, like Public Service Loan Forgiveness. However, lawmakers have not yet said when they’ll roll out the program for eligible borrowers to apply for the loan separation.

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