Student Loan Forgiveness: What’s Getting Fixed?

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Editor's Note: Wondering about legal challenges to President Biden's student debt relief plan? Click here to read more about student debt cancellation.

As of Oct. 25, the total debt erased through existing forgiveness programs since the start of President Biden’s term reached nearly $38 billion, according to the Department of Education.

The education department estimates roughly 1.75 million borrowers have seen their debt erased through targeted one-time fixes:

More than $14 billion for 1 million borrowers whose schools either defrauded them or closed.
$14 billion for more than 236,000 borrowers through Public Service Loan Forgiveness.
$9 billion in total and permanent disability discharges, impacting more than 425,000 borrowers.

In addition to loans discharged through these existing forgiveness programs, the administration announced it will return federal borrowers who have defaulted on their loans to good standing through the Fresh Start initiative, and, more prominently, openly discussed a broad student debt cancellation plan.

» MORE: What you need to know about student debt cancellation

While the department says it is working on new regulations that more permanently remedy the flaws in forgiveness programs, here's what has happened so far.

Borrowers seeking other types of forgiveness are eligible for Biden’s cancellation

President Biden announced a plan to cancel up to $20,000 in student loan debt for federal borrowers.

Borrowers with qualifying loans who are seeking other types of loan forgiveness, such as PSLF, can also qualify for Biden's debt relief.

Borrowers who are already enrolled in an income-driven repayment plan are likely to be among those who receive cancellation automatically since the Department of Education already has their income information.

Borrowers who are likely to receive Biden’s cancellation automatically may also choose to opt out if they're concerned about, for example, state tax implications — other types of existing loan forgiveness are not taxed as income by any states, but Biden's cancellation may be.

Those PSLF-seeking borrowers not enrolled in an income-driven repayment plan will need to submit an application to access cancellation.

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Borrower defense and closed school discharge fixes

Borrowers can get debt relief if they were defrauded by their schools through borrower defense or if their school shutters before they can complete their degree program through closed school discharge.

On Aug. 30, the department discharged all federal student loans for borrowers who enrolled at Westwood College from 2001 through 2015, when it closed. The Department of Education says Westwood grossly misrepresented job prospects and career potential to its students. About 79,000 borrowers will receive $1.5 billion in relief, whether they have made a borrower defense claim or not.

On Aug. 16, the education department announced a group discharge for all federal student loans that borrowers used to attend ITT Technical Institute from Jan. 1, 2005, through September 2016, when ITT Tech shut its doors for good. All borrowers who meet this criteria will see their debt discharged even if they have not yet submitted a borrower defense application. In addition to this announcement, roughly 100 borrowers who attended Kaplan Career Institute will also see their debt discharged.

The department also announced it was, for the first time ever, seeking to recoup the claims paid out for borrower defense. DeVry University will be required to pay nearly $24 million to the education department

On June 1, the education department made its largest-ever single discharge: $5.8 billion among 560,000 students who attended Corinthian Colleges at any time. Corinthian Colleges, a for-profit chain, closed and filed for bankruptcy in April 2015 as a result of a bevy of accusations and lawsuits against the company, including misrepresenting job placement rates, predatory lending practices and exploitative targeting of students in vulnerable populations.

The Corinthian Colleges discharges are automatic and do not require borrowers to submit an application, which is a new precedent for borrower defense.

More borrower defense discharges are on the way.

On June 23, the Department of Education announced a settlement of borrower defense claims that would provide roughly 264,000 student loan borrowers with $7.5 billion in debt relief. The settlement will provide full relief including student loan forgiveness, payment refunds and credit repair to 200,000 borrowers who filed before June 2022 and attended certain for-profit schools. The remainder have pending claims against schools not on that list; decisions on their cases will be streamlined.

» MORE: $6 billion in relief to defrauded students signals change ahead

As for closed school discharge, an Aug. 10 report from the Government Accountability Office found the program hasn’t functioned in the most optimal way to provide relief to borrowers. The report says:

The Department of Education may take several months after a school’s closure to notify borrowers of their eligibility for discharge.
Student loan servicers send notifications to borrowers with “incomplete and potentially confusing” information that may derail the likelihood a borrower will seek a discharge.
Student loan servicers do not proactively inform borrowers of their eligibility even when borrowers call in or in delinquency and default notices they send to borrowers.

The GAO recommends improvements that would rectify these missteps. It’s unclear if the education department plans to make the same or similar changes to the program.

Income-driven repayment forgiveness one-time review

Borrowers who were given inaccurate advice about their income-driven repayment options will get a second chance for past payments to count toward the total needed for forgiveness. The education department announced in April a new one-time review of past payments that is expected to result in 3.6 million borrowers inching closer to forgiveness and thousands more over the finish line.

The review of payments is spurred by acknowledgement that millions of borrowers were improperly steered into forbearance, which pauses payments but allows interest to rack up. Those missed payments also did not count toward the 120 needed for Public Service Loan Forgiveness or the 240 to 300 needed for income-driven repayment forgiveness.

Payments for all federal student loans are paused interest-free until at least the end of August, but the ongoing campaign to find and address errors and administrative failures means many borrowers will find their balances erased or the number of payments they owe significantly reduced when payments resume.

The department estimates the newest one-time review of past payments should result in:

Immediate debt cancellation for at least 40,000 borrowers under the Public Service Loan Forgiveness program.
Thousands of borrowers with older loans will receive income-driven repayment forgiveness.
More than 3.6 million borrowers will move at least three years closer to income-driven repayment forgiveness.

How will I know if my loans are included?

You might not know if you qualify for weeks or even months. The education department said its federal student aid office would begin implementing these fixes immediately, but borrowers might not see the changes reflected on their student loan accounts until the end of 2022.

Borrower should receive retroactive credit toward forgiveness if:

Your servicer steered you into a long-term forbearance and you missed out on income-driven repayment. The months spent in the forbearance will be credited toward income-driven repayment forgiveness — up to 36 months.
You made the required number of payments for income-driven repayment forgiveness — 20 or 25 years — regardless of your repayment plan or if the loan was consolidated into the direct loan program.
Your loans spent time in deferment prior to 2013 (except in-school deferment). Those months or years will count toward income-driven repayment forgiveness.

Will my servicer know if I qualify?

Servicers were reportedly not involved in advance discussion of the changes to the income-driven repayment process. In a statement, groups representing the servicers argued the education department put them in the position of being unable to plan for implementation and provide clear information to borrowers.

The federal student aid office is expected to issue new guidance to servicers to improve income-driven repayment counting practices and will track payment counts in its own data systems.

Do I have to do anything?

All of the fixes should be automatic. But borrowers with a history of a short-term forbearance (less than 12 months consecutively) should ask for a review by filing a complaint with the FSA Ombudsman at StudentAid.gov/feedback.

What if I had delinquencies or a student loan in default?

As part of a “fresh start” opportunity included in the student loan payment pause extension, borrowers with delinquent or defaulted student loan debt are expected to be returned to good standing. More updates are expected in the coming weeks.

However, these income-driven repayment plan fixes will not apply toward forgiveness for borrowers with loans in delinquency or default, according to the department.

The department is also clearing backlogs of applications from borrowers who were defrauded by their schools, faced school closures before attaining a degree and have permanent disabilities — now, that list also includes those seeking forgiveness in exchange for public service.

Public Service Loan Forgiveness waiver

In October 2021, the education department issued a new waiver to ease the application process for Public Service Loan Forgiveness, or PSLF. It’s a program to discharge debt for borrowers who work for employers like the government, public schools and hospitals.

Forgiveness through PSLF has been notoriously difficult to attain because of complex rules about the type of loans and repayment plans allowed. Plenty of technicalities have disqualified payments from counting toward the 120 needed for discharge. And then there's the paperwork: 10 years’ worth of employment certification.

The results of this red tape have been dismal: From Nov. 9, 2020, to October 2021, when the waiver was put in place, only 2.4% had been approved among PSLF applications. But the waiver is showing improvement: By the end of April 2022, federal data show 10.1% of applicants saw their debt discharged.

As of August, the Department of Education says more than 175,000 borrowers received PSLF discharges under the PSLF waiver. The total balance discharged is $10 billion.

More changes coming to PSLF

On Oct. 25, the education department announced the PSLF waiver will not be extended past its Oct. 31 deadline. But the department did indicate it would make certain aspects of the waiver permanent. These changes won’t go into effect until July 1, 2023. So long as borrowers still meet public service employment requirements, they can get credit for:

Late partial and lump sum payments.

Months borrowers spent in specific types of deferment or forbearance, including military service, economic hardship or cancer treatment.

The changes would also allow qualifying public service employers to certify employment for contractors.

What payments qualify in the waiver?

Under the new PSLF limited waiver, borrowers who worked full time for a qualifying public service employer can get prior loan payments counted toward PSLF, even if payments were:

Made on disqualified Family Federal Education Loan program loans (that is, commercially held) or Perkins loans, so long as they consolidate into a direct loan.
Previously consolidated, which reset payments that counted toward PSLF to zero.
Made in the wrong repayment plan, like a standard, graduated or extended plan.
Made late.
On pause while the borrower was on active duty in the military.

Parent PLUS borrowers were left out of this limited waiver; those borrowers can still apply, but old application rules remain. Student loan experts are unsure why parent PLUS borrowers were excluded.

How can I get the PSLF waiver?

Borrowers who are eligible for relief under the new limited waiver must submit a PSLF form by Oct. 31, 2022, to qualify. Borrowers must have federal direct student loans or consolidate into a direct loan before receiving any forgiveness. That means borrowers can technically submit an application, but they won't be eligible for forgiveness if they do not consolidate into a federal direct loan. Borrowers can consolidate their student loans via the federal student aid site and submit the PSLF form to certify employment and apply for PSLF.

During the current interest-free forbearance, which began March 2020, each month of nonpayment counts toward forgiveness.

Reconsideration for rejected PSLF applications is available

Beginning April 2022, borrowers whose applications were rejected for PSLF and Temporary Expanded PSLF can request a reconsideration online at studentaid.gov. Anyone who thinks their application should be reconsidered can submit a request.

You'll be able to submit one or more reconsideration requests of your application to certify employment or payment determinations. You won't need to provide more documentation with your request, but you might have to provide more information following its review. There was no deadline provided.

You still must meet payment and employment requirements under the law, which includes the current waiver that would count previously ineligible payments.

To figure out if you need a reconsideration of your employer, you can use the PSLF Help Tool. If your employer isn’t eligible, consider supplying documentation as to why the not-for-profit organization you work for should qualify.

Federal Student Aid did not indicate how long it would take to review each submission. Make sure your studentaid.gov account has the most up-to-date contact information so you can receive correspondence. More information about reconsideration of payment counts and employer qualifications are available on the student aid site.

Total and Permanent Disability Discharge fixes

Total and permanent disability discharge is a type of student loan forgiveness for borrowers who cannot work due to a physical or mental impairment. As of June 1, a total of $8.5 billion among over 400,000 borrowers who qualify as disabled has been discharged.

To identify future eligible borrowers, data will be shared with the Department of Education from the departments of Social Security and Veterans Affairs.

Borrowers usually have to provide annual earnings documentation for three years after discharge, but the department suspended this requirement on March 29, 2021, due to the pandemic — it’s retroactive to March 13, 2020. And in August 2021, the department announced it would be extended indefinitely.

Also in flux: Who is servicing student loans

Following in the footsteps of fellow federal loan servicers Navient and GSMR, FedLoan, the private servicer managing all loans for borrowers on track for PSLF, is ending its contract in December 2022. That means borrowers seeking PSLF will have a new servicer. Before losing access to your FedLoan account, download all payment records to ensure nothing gets lost in the transition.

Multiple loan servicers will be taking on the FedLoan portfolio including MOHELA, Aidvantage (formerly Navient), Edfinancial and Nelnet. But only MOHELA will be managing the PSLF program.

Borrowers should update the contact information in their Federal Student Aid, or FSA, accounts to receive information directly from the government about the PSLF waiver.

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