Other avenues for forgiving or winnowing student loan borrowers’ debt, however, are alive and well. There’s even a plan in the works to keep people from borrowing to attend a subpar school.
Together, these programs affect millions of borrowers, have led to billions in student loan debt being forgiven and could erase billions more. Most are meant to be long-term changes rather than a one-time fix.
No matter what the court decides on Biden’s signature plan, other programs are essential to addressing the nation’s student loan debt in the long run: One-time debt relief would wipe out a chunk of the country’s $1.7 trillion student loan debt portfolio, but it could rebound if widespread borrowing continues unabated.
A proposal from the White House, expected to take effect next year, would address student loan payments, interest on payments and other aspects of how repaying loans work for people using a so-called income-driven repayment plan. Nearly all federal student loans are eligible for one of these plans. The changes include:
For undergraduate loans, cutting in half the amount borrowers have to pay each month from 10% to 5% of discretionary income.
Raising the amount of income considered nondiscretionary, which means it is protected from being factored in to how much people have to repay. That guarantees that borrowers earning under 225% of the federal poverty level – that’s about what a person making $15 an hour makes in a year – will not have to make monthly payments.
Forgiving loan balances after 10 years of payments, instead of 20 years, for borrowers whose original loan balance was $12,000 or less. The federal Education Department predicts this change means nearly all community college borrowers would be debt-free within 10 years.
Covering borrowers’ unpaid monthly interest so no borrower’s loan balance will grow as long as they make their monthly payments – even when that monthly payment is zero because their income is low.
The premise of the Public Service Loan Forgiveness program, created in 2007, is simple: Give up high private sector wages. Work a public sector job for 10 years. Pay down your student loan debt at the same time. After a decade, the federal government erases whatever’s left of that debt.
But when Education Secretary Miguel Cardona took office in 2021, he learned that in the history of the program, only 7,000 people had loans forgiven this way. The program’s complex requirements prevented many borrowers from benefiting. For example, only Direct Loans qualified for the program, cutting out borrowers with Federal Family Education Loans (FFEL). Borrowers had to enroll in specific income-driven repayment plans, and late payments sometimes weren’t counted toward a borrower’s 10 years of making payments.
The Biden administration temporarily changed the Public Service Loan Forgiveness program to ease some of the red tape. That translated into billions in student loans forgiven for more than 373,000 people.
