Student Loan Forgiveness Won’t Be Available To These Borrowers

President Joe Biden (Photo by Kevin Dietsch/Getty Images) GETTY IMAGES

Student loan forgiveness won’t be available to these student loan borrowers.

Here’s what you need to know.

Student Loans

If there is more student loan forgiveness, it’s clear who it will help. Democrats in Congress and President Joe Biden agree that there should be wide-scale student loan forgiveness. However, they disagree on at least two points on student loan cancellation. First, while Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) want up to $50,000 of student loans cancelled, Biden wants up to $10,000 of student loans forgiven. Second, Warren and Schumer want Biden to issue an executive order for student loan forgiveness. However, Biden says Congress must cancel student loans because he doesn’t believe he has the legal authority to cancel student loan debt for every student loan borrower. Despite these differences, if there is any student loan forgiveness, Congress and Biden could agree that the following student loan borrowers won’t qualify for student loan cancellation. Here’s who could be excluded from wide-scale student loan forgiveness:

1. Student loan forgiveness wouldn’t apply to private student loan borrowers

When you read proposals for wide-scale student loan cancellation, it’s typically referring to federal student loans only. More than 90% of all student loan debt is federal student loan debt, with over one hundred million dollars of private student loan debt. While Sen. Bernie Sanders (I-VT) has proposed that all $1.7 trillion of student loan debt should be cancelled, there is no mainstream proposal to cancel private student loans. So, if you have private student loan debt, don’t expect to get any student loan forgiveness. Why? The federal government owns most federal student loan debt and could work through the U.S. Department of Education and student loan servicers to cancel this portion of student debt seamlessly. In contrast, private debt can be owned by third party financial institutions and investors, which makes it logistically more challenging to cancel. If Congress or the president implements student loan cancellation, private student loan debt is unlikely to be included. (Here are 5 reasons why Biden hasn’t cancelled student loans).

2. Student loan forgiveness may be limited to borrowers with a certain income

Student loan cancellation won’t apply to every student loan borrower. Members of Congress often make blanket statements to “cancel all student loan debt.” However, there’s no mainstream proposal to cancel everyone’s student loan debt. Warren and Schumer’s proposal would limit student loan forgiveness to student loan borrowers who earn up to $125,000 annually. That said, that income cut-off is higher than the income cut-off for recent stimulus packages. If Congress considers any wide-scale student loan cancellation, it’s possible that income threshold could be lowered, which could exclude millions of student loan borrowers from getting student loan forgiveness.

3. FFELP and Perkins Loans likely won’t qualify for student loan cancellation

If you have FFELP Loans or Perkins Loans, you’ve been hoping for student loan relief and are probably frustrated that you have been excluded. Unlike Direct Loans such as Stafford Loans that are issued by the U.S. Department of Education, FFELP Loans were issued by financial institutions while Perkins Loans are issued by colleges and universities. Congress excluded FFELP Loans and Perkins Loans from the Cares Act — the $2.2 trillion stimulus package — when they passed comprehensive temporary student loan forbearance. One strategy that FFELP Loan borrowers can consider is a Direct Consolidation Loan with the U.S. Department of Education. By consolidating FFELP Loans into a Direct Consolidation Loan, student loan borrowers can get a Direct Loan. This loan type would be eligible for student loan forgiveness, if there is any. Contact your student loan servicer or the U.S. Department of Education for details.

Student loan cancellation: here’s who could qualify

Not all hope is lost for student loan forgiveness. Here’s how to get approved for student loan forgiveness. These groups of student loan borrowers could benefit from student loan forgiveness:

Federal student loan borrowers

If there is any student loan forgiveness, it will focus on federal student loan borrowers with Direct Loans. This is the same group of student loan borrowers who have benefitted from temporary student loan forbearance under the Cares Act.

Student loan borrowers affected by targeted student loan cancellation

Biden will continue to employ targeted student loan cancellation to bring student loan relief to groups of student loan borrowers. Since becoming president, Biden has cancelled nearly $10 billion of student loans through targeted student loan cancellation. By January 31, 2022, Biden will have cancelled at least $70 billion of student loans for student loan borrowers. This includes student loan borrowers with a total and permanent disability as well as student loan borrowers who were misled by their college or university and have sought student loan forgiveness under the borrower defense to repayment rule.

Student loan borrowers who are enrolled in this plan for student loan forgiveness

Student loan forgiveness won’t be available for everyone, but this plan is available now. It won’t provide you with immediate student loan forgiveness. However, income-driven repayment plans such as IBR, PAYE, REPAYE and ICR can help you lower your monthly federal student loan payment and get student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student loans).

Student loan cancellation for public servants

Federal student loan borrowers who work full-time for a qualifying non-profit or public service employer and meet other requirements could get full student loan cancellation of their federal student loans. While this isn’t upfront, wide-scale student loan cancellation, expect the U.S. Department of Education to revamp this program to better meet the needs of student loan borrowers. With a 98% rejection rate and many frustrated student loan borrowers, the Education Department has held hearings and collected public comments to improve outcomes for student loan borrowers. (Here are 17 ways for Biden to fix student loan forgiveness).

There is no guarantee that Congress or Biden will enact wide-scale student loan cancellation. There isn’t broad support for student loan cancellation of any amount.(Here’s where Democrats stand on student loan forgiveness). Biden wants Congress to cancel student loan debt, but he has indicated that he is unlikely to cancel student loan debt unilaterally without congressional authorization. Given these scenarios, make sure you undertand all your options for student loan repayment. Here are some popular ways to save money with your student loans:

• Student loan refinancing (get a lower interest rate + lower monthly payment)

• Income-driven repayment plans (get a lower monthly payment)

• Public service loan forgiveness (get student loan forgiveness)