New Debt Forgiveness Options For Student Loan Borrowers

Federal Government Student Loan Forgiveness Portal Is Temporarily Closed. Here's what you need to know

Huge relief for low income borrowers: Loan forgiveness of $20,000 if you revived a Pell grant in college, Income Based Repayment options now only require 5% of income.
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Updated: 2022-12-06
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IMPORTANT: The Federal Forgiveness portal is not taking new applications, pending appeal of a court ruling that declared the program unconstitutional (even though those challenging the program may lack the legal standing to bring the challenge).

President Biden has extended the loan forbearance period due until August 29, 2023?, 60 days after the end of the Supreme Court’s term, to handle this unforeseen problem.

Originally the forgiveness program was announced to coincide with the end of the pandemic suspension of student loan payments, with people given 60 days from (November and December) to apply for loan forgiveness before the first payments resumed after the end of extended Covid-19 Pandemic Forbearance.

Now that the forgiveness program is stalled in the courts, President Biden has announced that all loans payment will resume 60 days after the legal proceedings are finalized, or June 29, 2023, the end of the Supreme Court’s current term.

How the program was SUPPOSED to work (and still may, depending on court rulings)

Student Loan borrowers in your state may be able to take advantage of the many new forgiveness options under the new Student Loan Debt relief plan announced by President Biden on August 24, 2022.

Details of the application process were released on October 11, 2022.

Official Forgiveness “portal” opened on October 15, 2022 


NOTE: AS OF NOVEMBER 22: The Program is Suspended Until the Courts Have Ruled on the Loan Forgiveness Program

No loans can be forgiven at this time. Those who have submitted applications may have heard that they meet the criteria, but actual loan forgiveness depends on how the courts rule.

Many borrowers (who received Pell Grants to attend college) will see $10,000 to $20,000 automatically eliminated from their student loan balance.

That means if you owed $6,500 on a federal student loan, you now owe nothing!

The new law has three major elements that are a true game-changer for student borrowers.

  1. It extends forbearance (pause) (in which payments and interest are suspended) until December 31, 2022 (now August 30, 2023). Forbearance started with the CARES Act in March 2020. It pauses payments and interest on Federal Student Loans
  2. it offers loan forgiveness of up to $20,000
  3. It offered new income-based-repayment options which limit your payments to no more than 5% of your income for 20 years. If you make those payments, the loan balance is written off. 

There are several good summaries of the law from sources like NPR and the National Consumer Law Center’s “Student Loan Borrower Assistance Center.”

The Student Loan Lawyer has a very clear video explaining the new law (also on Facebook Watch)  by a lawyer who understands the nuances of the words used to describe these loans and how this affects your qualifications. 

3 Key Points:

1. Your First Student Loan Bill will be January September 25 or 31st of, 2023

Student loan forbearance, which started under the CARES Act in March 2020, is being extended one last time until December 31, 2022 August 30, 2023. Bills will go out on September 1 for student loan borrowers, and the first bills will probably be due around September 25 or 31st.

2. The New “Income Based Repayment” (IBR) or “Income Derived Repayment” (IDR) now requires only 5% of income (not 10% anymore)

Before those first bills come due, you should learn about the new income-based repayment options that can limit your student loan payments to only 5% of your income for the rest of your life. As long as you make these payments for 20 years, the rest of your loan is forgiven, regardless of the remaining balance.

The new rules change the existing income-based rules. Current rules require a 10% of income payment on all student loans. That is cut in half by the new regulations. 

It is unclear whether the court ruling affects the IBR program. It may not.

3. The new rules eliminate $10,000 to $20,000 in student loan debt (married couples can double).

  • For those with debts less than $10,000 to $20,000, this will completely eliminate their debt. (About 74 million borrowers meet this description
    • If you got Pell grants, you get $20,000 in relief
      • most of these are poor, first-generation college students
  • For those with loans more like $80 to $100,000, this may wipe out the interest that you’ve accumulated over time.
  • For those with six-digit loan balances, you’ll still have a six-digit loan balance, but this will help. 

Legal Consumer - Law. Jurisdictional relevance: The content of this article pertains to all US states and counties.

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