Biden has announced plans to cancel $11 billion in student loans. Here’s who gets forgiveness

BY Sydney LakeNovember 17, 2021, 4:56 PM
U.S. President Joe Biden visits a bridge along NH 175 spanning the Pemigewasset River, as seen in November 2021. (Photo by John Tully/Getty Images)

In just about 11 months in office, the Biden-Harris administration has issued five rounds of student loan forgiveness. The waves total more than $11 billion, benefiting hundreds of thousands of borrowers. While that may sound like a promising step toward universal student loan debt cancellation, the majority of federal borrowers won’t reap any reward quite yet.

Total federal student loan debt stands at nearly $1.8 trillion, burdening more than 43 million borrowers; the forgiveness granted thus far applies to just 1% of all federal student loan borrowers, a figure that Cody Hounanian, executive director of the Student Debt Crisis Center, says barely scratches the surface.

“It’s hard to conceptualize, but it really is a tiny, tiny, tiny fraction of how much the government spends on other issues,” Hounanian previously told Fortune. “It’s a drop in the bucket when it comes to the broader student debt issue.”

Although a lot of work still needs to be done to alleviate student loan stress for millions of borrowers, there are plenty of people who are already benefiting from the debt forgiveness announced this year. Fortune has rounded up the main borrower groups who are currently eligible for forgiveness.

Borrowers who attended now-defunct schools

In March, Education Secretary Miguel Cardona announced that the department would wipe out student debt for borrowers who had approved “borrower defense to repayment” claims. This was the first of three rounds of student loan forgiveness this year that is aimed at helping borrowers who attended schools that were deemed as having taken part in deceptive or illegal practices. 

More than 188,000 borrowers will benefit from these three rounds of forgiveness, totaling about $2.6 billion in canceled federal student loans. Two subsequent rounds of borrower defense forgiveness were announced in July and August.  

Before the official rounds of forgiveness, borrowers had to submit a loan discharge application form, which asks questions about the student’s previous enrollment. The Federal Student Aid (FSA) office then decided whether to grant no, partial, or full forgiveness if the applicant’s school had deceived them.

Under the three rounds of forgiveness, the Department of Education will cancel debt for borrowers who attended these institutions: Corinthian Colleges, ITT Technical Institute, American Career Institute, Court Reporting Institute, Westwood College, or Marinello Schools of Beauty. These schools have been deemed as having misled students. 

“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said in a March 18 statement announcing the first round of forgiveness. Automatic student loan discharges for these borrowers started in September.

Borrowers with total and permanent disabilities

In a $5.8 billion round announced in August, the Education Department said it would wipe out student loan debt for 323,000 borrowers with total and permanent disabilities that prevent them from being able to work.

As long as the borrower is registered as having a “total and permanent” disability (TPD) by the Social Security Administration (SSA), discharges will be given automatically. The SSA started sharing this information with the FSA office in September through a data match. Borrowers who have a registered TPD will start to have their loans automatically discharged, and the Education Department will notify borrowers when that happens. The department expects this to happen “by the end of the year,” it said in the August announcement.

“This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support,” Cardona said in an August statement.

TPD borrowers no longer have to fill out a separate application to receive relief, according to the Education Department, which announced it would change how it monitors TPD borrowers. Previously, these borrowers’ income were monitored for three years after receiving TPD status, and if a borrower’s income met a certain threshold, then the loans could be reinstated. The Education Department in August stopped sending these automatic income information requests. The department said, as part of the August announcement, it would also propose eliminating the monitoring period entirely. 

Borrowers who are public servants

In early October, the Education Department unveiled sweeping changes to its largely failed Public Service Loan Forgiveness (PSLF) program, which was developed to relieve public servants—including teachers, firefighters, social workers, and other government or nonprofit employees—of federal student loan debt. The changes immediately canceled $1.7 billion in student loan debt.

PSLF launched in 2007, requiring borrowers to hold a public sector job, be enrolled in a repayment plan, and make 120 on-time student loan payments. While that seems straightforward, 98% of borrowers who applied for forgiveness since PSLF’s inception were denied by the program due to a number of hurdles with the approval process. Changes to the program will ease the application process, according to the Education Department. 

PSLF’s overhaul made 22,000 borrowers automatically eligible for forgiveness “without the need for further action on their part,” according to the Education Department. Another 27,000 borrowers could qualify for a collective $2.8 billion in forgiveness if they “certify additional periods of employment,” according to the department. Long-term changes to the program could benefit more than a half-million borrowers because the PSLF program didn’t count certain payments made on federal loans. Borrowers will need to consolidate any non-qualifying loans under the federal Direct Loan program to have the PSLF program work for them.

“All told, the department estimates that over 550,000 borrowers who have previously consolidated will see an increase in qualifying payments, with the average borrower receiving another two years of progress toward forgiveness,” according to the Education Department. “Many more will also see progress as borrowers consolidate into the Direct Loan program and apply for PSLF and as the department rolls out other changes in the weeks and months ahead.”

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