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Student Loan Debt Relief – An Introduction

The cost of college and student loan debt relief is a tremendous concern facing Americans today. The student debt crisis is one of the biggest crises impacting young people across the country. Student loan relief efforts have not been enough to help many families pay for college tuition or help college graduates pay for their educations. College tuition costs have become prohibitive for some, and merit-based scholarships are no longer enough to cover rising college costs. The average college student debt has grown enormously over the past 20 years alone, and we are now in an unprecedented student debt crisis. 

That is why federally funded student loan debt relief programs can make a huge impact as students navigate rising college costs. To mitigate the student loan debt crisis, policymakers in Washington D.C. have begun to institute student loan forgiveness programs that can help some borrowers. By offering student loan debt relief programs, lawmakers hope to change the tide of the student debt crisis. 

Biden’s new student loan forgiveness program

In late August, the current administration announced a new program to provide student loan debt relief to millions of Americans: the Joe Biden student loan forgiveness plan. This will join other student loan forgiveness programs and provide thousands of dollars in student debt relief. This student loan relief will hugely impact the lives of many Americans facing crushing student loan debt.

Here’s what you need to know! 

How does student loan debt impact the college admissions process?

Student loan debt is a huge factor in where a student can attend college. College tuition costs, student loan debt, and student loan forgiveness each impact the college admissions process. For example, students applying to college today must consider how their student loan debt—which may become tens of thousands of dollars—will affect them in the future. Without proper student loan debt relief, financial aid and merit-based scholarships have become more important than ever. This is why student loan debt relief matters—as the student loan debt crisis continues, rising college costs impede the lives of many students and graduates. 

However, the Joe Biden student loan forgiveness plan aims to reduce the impact of the student debt crisis. This will combat the rising cost of college over time and provide student loan debt relief. The Joe Biden student loan forgiveness plan is a three-part student loan debt relief plan that promises to cancel $10,000 of student loan debt for low- to middle-income borrowers. This will have a huge effect on the student loan debt crisis, especially for college graduates from middle and low income brackets and first-generation graduates

Understanding the student debt crisis

Let’s dive into some student loan debt facts about the student debt crisis. According to CollegeBoard, in the past 40 years, college tuition costs have nearly tripled. According to an analysis from the Department of Education, the average college student debt is almost $25,000.

This is an unprecedented amount of student loan debt. In total, Americans currently owe $1.7 trillion in student debt. As these student loan debt facts and statistics show, we are in a student loan debt crisis. Clearly, the average college student debt is crushing graduates of higher education. Experts across party lines understand that Americans need student loan debt relief to help fight this student loan debt crisis.   

Joe Biden student loan forgiveness plan
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However, the Biden administration is making waves among student loan debt relief programs. With the administration’s new student loan debt relief plan, qualifying students will receive $10,000 in student loan debt relief. This plan is a key step forward for student loan debt relief programs. Although this student loan relief may not solve the student debt crisis altogether, it will hugely help those with qualifying student loan debt.

Other student loan debt relief programs

President Biden’s student loan relief plan is not the only student loan debt relief plan available. The Public Service Loan Forgiveness Program also helps tackle the student loan debt crisis. Among other positive changes in student loan forgiveness programs, the government recently revamped the Public Service Loan Forgiveness Plan. It now includes a Limited Waiver to help more students access student loan debt relief. These widespread and accessible student loan debt relief programs will help tackle rising college costs and end the student debt crisis. 

The Public Service Loan Forgiveness Program forgives the remaining balance on direct loans after 120 qualifying monthly student loan debt payments are made under a qualifying repayment plan while working full-time for a qualifying employer. This student loan debt relief plan was recently expanded under the “limited PSLF waiver”. These changes to the Public Service Loan Forgiveness (PSLF) Program allow student loan debt holders to receive credit for past periods of repayment that would otherwise not qualify for Public Student Loan Forgiveness. 

PSLF limited waiver ends in October

However, this student loan debt relief waiver only lasts through October 31, 2022. So, this student loan relief plan will not lead to lasting student debt relief for all students and graduates. Americans need long-lasting and reliable student loan relief if we’re going to beat the student debt crisis. Stay tuned for more details about how the Public Service Loan Forgiveness Program and the Joe Biden student loan forgiveness plan work to combat the student loan debt crisis. 

In this article, we’ll break down student loan forgiveness and the new law forgiving student loans. We’ll also give you details about the student loan debt crisis, student loan debt relief, and more student loan debt facts. We’ll even talk about the Public Service Loan Forgiveness application and give you resources for college financial planning. If you find yourself asking, “Do I qualify for student loan forgiveness?” then read on to learn more about available student loan debt relief!

Student Loan Forgiveness and COVID‒19 – A Background

Throughout the pandemic, the economy has suffered. The student loan debt crisis has become overwhelming for many families. Americans have been faced with high levels of unemployment, which has impacted the worsening student debt crisis. Many Americans are responsible for monthly payments on their student loan debt, which means that economic conditions can heavily impact their ability to pay. 

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Student loan debt relief is therefore more important than ever. As the cost of college over time has risen, financial aid for students hoping to avoid extreme student loan debt has not. This is why student loan forgiveness programs, like the Joe Biden student loan forgiveness plan and the Public Service Loan Forgiveness Program, are all the more crucial. 

The student loan repayment pause

In response to conversations about the student loan debt crisis and student loan relief, President Biden issued a policy when he first took office. This policy provided student loan debt relief through a student loan debt relief repayment pause. The student loan relief pause meant that no one with a federally held student loan debt had to pay any amount in student loan debt payments until the pause ended. While this was a helpful step toward student loan relief, the repayment pause alone will not end the student loan debt crisis. 

The student loan debt pause has been extended several times. As of August 2022, this student loan relief program was extended for a final time through December 31, 2022. Because of this student loan debt relief, no student has paid a federal student loan since President Biden took office. This type of student loan debt relief is beneficial, but many Americans were anxious as the student loan debt repayment pause came to an end. 

While helpful, the student loan relief repayment pause alone is not enough to combat the student debt crisis. So, the Joe Biden student loan forgiveness plan will be a key step toward student debt relief. 

Public Service Loan Forgiveness

Before the new law forgiving student loans and the student loan relief repayment pause, there was another type of student loan relief: the Public Service Loan Forgiveness program. One of the most effective student loan forgiveness programs, the PSLF helped those working in education, health, government, and other public sector jobs pay their student loan debt and get closer to being debt-free

We’ll talk more about the Public Service Loan Forgiveness application and qualifications later on in this article. In fact, you may find you’re eligible for this student loan debt relief as well as the Joe Biden student loan forgiveness plan. Each of these programs, while not enough to end the student loan debt crisis, is a great step towards student loan relief for all. 

As the end of the student loan debt pause loomed, many Americans wondered how they would pay loans off again. After all, the economy has not fully recovered from the COVID-19 pandemic, and this student loan debt crisis is unprecedented.

The new executive order

Now, the Biden-Harris administration has bolstered the student loan relief Public Service Loan Forgiveness plan by introducing their student loan debt forgiveness policy. Given the student debt crisis, these more drastic forms of student loan relief make a huge difference. The new law forgiving student loans will alleviate the pressure of the student debt crisis for many. This may also combat rising college costs and stop the student loan debt crisis from worsening.

Are you asking yourself, “Do I qualify for student loan forgiveness?” We’ll expand on this student loan debt relief policy—and student loan debt forgiveness as a whole—later in this article. We’ll also provide resources for college financial planning in the face of the student debt crisis, like this college financial aid webinar.

What are the four types of student loans?

Before we unpack student loan forgiveness and how it works, let’s offer some background on student loans and how they function, along with more student loan debt facts about student loan relief. We’ll also explain how you can use student loans to cover the rising cost of college. Later on, we’ll talk about the Public Service Loan Forgiveness application and how to apply for the Joe Biden student loan forgiveness plan in the face of the student debt crisis. These student loan debt relief programs are crucial steps in tackling the student debt crisis. 

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Before you read more about the student loan debt crisis, you should know about the types of student loans out there. There are four types of federal student loans: direct subsidized loans, direct unsubsidized loans, direct PLUS loans, and direct consolidation loans. Now, we’ll break down what exactly each type of loan is and how they offset the cost of college. 

1. Direct subsidized loans

Direct subsidized loans and direct unsubsidized loans are fairly similar. They’re both federal student loans offered by the U.S. Department of Education to help eligible students cover the cost of higher education at a four-year college or university, community college, trade, career, or technical school. The key difference between subsidized and unsubsidized loans is that direct subsidized loans have slightly better terms. These are designed to help students with demonstrated financial need. The crux of these better terms is that the U.S. Department of Education pays the interest on a direct subsidized loan during certain periods. These include a student’s college years, a postgraduate grace period, and a period of deferment.

2. Direct unsubsidized loans

Conversely, with direct unsubsidized loans, students do not need to demonstrate financial need. Students are then responsible for paying the interest on all loans. However, the interest is the same for both types of loans: 4.99%. Additionally, there is a loan fee on all direct subsidized loans and direct unsubsidized loans. Loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023, have a loan fee of 1.057%. 

3. Parent PLUS loans

Direct PLUS loans are available for eligible parents and graduate/professional students through schools participating in the Direct Loan Program. So, as an undergraduate, your parents would be the fiscally responsible party for any direct PLUS loans taken out. For direct PLUS loans disbursed on or after July 1, 2022, and before July 1, 2023, the interest rate is 7.54%. This is a fixed interest rate for the life of the loan, which means the amount of interest you pay on the loan will not change retroactively.

4. Direct consolidation loans

Direct consolidation loans are for students who want to consolidate multiple federal education loans into one loan at no additional cost. You must submit an application to have your loans consolidated into a direct consolidation loan. Then, if accepted, you will pay one fixed interest rate on all of your outstanding loans. To read a detailed list of the pros and cons of direct consolidation loans and view which loans are eligible for consolidation, click here

What about private loans?

These categories apply to federally funded student loans, which means that the U.S. Department of Education serves as the lender.  However, in addition to federal loans, private student loans are also available. However, they tend to have less favorable terms and are often a worse option for students with financial need. This can contribute to the student debt crisis, especially without any foreseeable private student loan relief. 

Private loans can lead to worse student loan debt. On a related note, private student loans are not included in the Biden administration’s plan for federal student loan relief. Instead, the administration’s policy solely relates to the Department of Education and its specific handling of federal student loans. So, private loans contribute to the student loan debt crisis but are not covered by most student loan debt relief programs. 

If you are interested in the history of student loan debt, student loan relief, the student debt crisis, and more student loan debt facts, click here

What is student loan forgiveness?

Student loan forgiveness means that you don’t have to pay back some or all of your loans. This can be life-changing for students and families, considering the cost of college over time in this student loan debt crisis. Student loan debt relief can help students afford college and not graduate with enormous amounts of debt. According to CNBC, at its current rate, “outstanding student loan debt could topple $3 trillion by 2035.”

Check out this list for more student loan debt facts. The student loan debt crisis is obviously a huge problem, which is why comprehensive student loan relief is so important. 

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Given the rising cost of college over time, it’s crucial for students to understand student loans, student loan debt, and student loan forgiveness. This is why getting financial aid advice from a financial aid advisor can be helpful during the college application process. 

Attending your dream school may mean you have to take out student loans. However, before you do, you must understand the student loan debt facts and the student loan debt crisis. Otherwise, you could end up owing more money than you’re able to pay back. Plus, the interest will compound over time. This means your cost of college over time will become more than what you originally intended to pay. That is the danger of student loan debt. If you plan to take out student loans, be sure you understand the student loan debt relief programs ahead of time. That way, you’ll be aware of all your options to cover college tuition costs. 

What is the average student loan debt?

You may hear the words “student loan debt crisis” and think, “How bad can a student debt crisis really be?” Well, let’s take a look at the average college student debt. According to the Biden Administration, the average undergraduate student today graduates with over $25,000 in student loan debt. That is definitely a student debt crisis. Not even merit-based scholarships or financial aid programs are enough to compete with rising college costs anymore. This is why there is so much talk of student loan debt relief programs. 

Here are some more student loan debt facts about the student debt crisis: the student loan debt crisis affects over 43 million Americans. Federal student loan debt alone totals $1.61 trillion of outstanding debt. Finally, 15% of all American adults report they have outstanding undergraduate student loan debt. In recent years especially, rising college costs have contributed to the student debt crisis. These facts show that there is an overwhelming need for student loan relief to address the student loan debt crisis. 

Student loan debt is rising

Ten years ago, in 2012, the student loan debt number was just $1.02 trillion. Since then, student loan debt has increased to over $1.7 trillion. Student loan debt is climbing at an unprecedented rate, owing primarily to the increasing cost of college over time. Rising college costs cause an increase in student financial need and a subsequent increase in student loan debt.

Take this quote from Educationdata.com: “The average 1996 graduate left school owing $12,750 ($21,930 in 2021 dollars) in student loan debt. Just over 10 years later, 1996 graduates with loans remaining owed an average of $16,500 ($22,110 in 2021 dollars) each.” This student debt crisis can’t be solved overnight, but student loan debt relief programs are a great first step.

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How much could the cost of college really have increased over time? In the past 22 years, the cost of college attendance has increased at an annual rate of 6.8%. To contextualize that number, that’s a growth rate 196.2% faster than currency inflation and 89.2% faster than wage inflation. This means that the average college student debt takes 20 years to pay off. Student loan debt also affects Americans of color more than white Americans. Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates.

With these facts in mind, you can understand the importance of student loan debt relief given the student debt crisis. This is why it can be helpful to have a financial aid advisor during the college admissions process. That way, you can contextualize your student loan debt options and student loan relief possibilities. 

What qualifies you for student loan forgiveness?

There are a few different qualifications for student loan forgiveness. First of all, there are several different words used to mean “cancellation”: forgiveness, cancellation, and discharge. These phrases all mean that you are no longer required to repay some or all of your student loan debt, but for different reasons. For example, you may qualify for student loan forgiveness based on your household income or if you are a Pell Grant recipient. 

One of the most popular student loan forgiveness programs is the Public Service Loan Forgiveness Program. To be eligible for this program, you must first have qualifying student loan debt. You must then also have a qualifying employer (i.e., one who is in the public sector). Finally, you must make 120 payments towards your student loan debt while working at the eligible public service company. You must also fill out a Public Service Loan Forgiveness application for this student loan debt relief. 

Student loan debt relief for educators

There is also student loan relief for teachers. If you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency, you may be eligible for student loan debt relief of up to $17,500 on your Direct Loan or FFEL Program loans. Furthermore, if your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan debt.

In the next section, we’ll unpack exactly who qualifies for Biden’s student loan forgiveness plan. Later on, we’ll dig deeper into Public Service Loan Forgiveness. Until the Joe Biden student loan forgiveness plan, the Public Service Loan Forgiveness Program was the most comprehensive form of student loan relief. So, let’s check out this new student loan debt relief plan that will help millions of Americans fight the student loan debt crisis. 

Who qualifies for Biden’s student loan forgiveness plan?

There are different qualifications for the new Biden Administration student loan debt relief plan. Below are the criteria from the White House to be eligible for this student loan relief:

  • Your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households).
  • If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt cancellation.
  • If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt cancellation.

So, if your income is less than $125,000, or if you’re married and your total household income is less than $250,000, you are eligible for up to $10,000 in student loan debt cancellation. If you received a Pell grant, you are eligible for up to $20,000 in student loan debt cancellation. 

What’s a Pell grant?

A Federal Pell Grant is an amount of money given to students who demonstrate exceptional financial need and have not earned a bachelor’s, graduate, or professional degree. Pell Grants are different from other types of loans because they do not have to be repaid. Submitting the FAFSA will allow schools to determine student eligibility for a Pell Grant. So, if you received a Pell Grant when you attended college, you are eligible for additional student loan debt cancellation per the Joe Biden student loan forgiveness plan. 

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However, you may notice the words “up to” in the criteria for receiving federal student loan debt forgiveness. Essentially, this means that students can only receive as much student loan debt relief as their current outstanding student loan debt. So, any student loan debt payments that have already been processed will not be refunded under Biden’s plan. 

You can read more about the qualifications for President Biden’s student loan forgiveness plan here.

Joe Biden student loan debt forgiveness plan: What else is included?

This student debt relief plan is one of the biggest we’ve seen in terms of tackling the student debt crisis. However, the $10,000 student loan debt relief is not the only significant feature of this new bill. Alongside the student loan forgiveness clause, the Biden administration has also agreed to extend the pause on all student loan debt payments to the end of this calendar year. 

Furthermore, the Biden administration has also proposed a new student loan debt repayment plan. The Biden-Harris Administration has proposed a new rule that will create income-driven repayment for student loan debt. This will reduce future monthly student loan debt payments for lower- and middle-income borrowers.

More details about the rule are that it would:

  • Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
  • Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment. This guarantees that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
  • Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
  • Cover the borrower’s unpaid monthly interest. This means that, unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.
student loan debt relief
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So, to recap, lower- and middle-income borrowers will pay no more than half of their monthly discretionary income (down to 5%, from 10%). Additionally, no student loan debt holder who makes less than 225% of the federal poverty level (about a $15 average minimum wage) will have to make a monthly payment. Also, student loan debt balances will be forgiven after 10 years of payments, down from 20 years, for those with loans of under $12,000 remaining. Finally, lower- and middle-income borrowers will not be responsible for monthly interest as long as they make monthly payments.

Curious about how President Biden’s student loan relief plan will affect U.S. consumers? Read this article

Do I qualify for student loan forgiveness? 

Now, finally, let’s answer your burning question, “Do I qualify for student loan forgiveness?” 

We listed the criteria for the new law forgiving student loan debt above. To recap, if you have an individual annual income of under $125,000 or a joint martial income of under $250,000, you qualify for student loan forgiveness under the new student loan debt relief plan.

In order to receive student loan forgiveness, the U.S. Department of Education will need to verify your income. So, if your income data is already available to the U.S. Department of Education, you shouldn’t need to do anything in order to receive funds. However, if your income data is not already available to the government, you’ll need to complete a simple application. This will be made available in the coming weeks. Keep an eye out for updates on this student loan debt relief plan so you can apply as soon as possible!

Are student loan forgiveness programs legitimate?

In short, yes, government-backed student loan forgiveness programs are legitimate. However, students who seek private loans should be cautious. Private loans won’t have the same level of protection that federal loans offer. 

What is Public Service Loan Forgiveness?

Public Service Loan Forgiveness is a type of student loan relief that is available only for direct loans. This student loan relief program forgives the remaining balance on Direct Loans once 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer have been made. You must also submit a Public Service Loan Forgiveness application.

Qualifying employers include: 

  • Government organizations at any level (U.S. federal, state, local, or tribal) – this includes the U.S. military
  • Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code

Organizations that do not qualify for Public Service Loan Forgiveness are: 

  • Labor unions 
  • Partisan political organizations
  • For-profit organizations, including for-profit government contractors
public service loan forgiveness
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There is currently a limited-time waiver that allows people to consolidate their student loan debt into a Direct Loan to access the program more easily. This also means that until the deadline (Oct. 31, 2022), student loan debt holders may receive credit for payments that previously did not qualify for PSLF or TEPSLF.

In order to qualify for the PSLF, you must fill out a Public Service Loan Forgiveness application. Read more about the PSLF here. Check out the Public Service Loan Forgiveness application here

Student Loan Debt Relief – Conclusion

We hope this article answered your questions about the student loan debt crisis, student loan relief, the new law forgiving student loans, and the Public Service Loan Forgiveness program. Despite this great news, we must issue a word of caution: there may be a long road ahead before loans are forgiven. Unfortunately, conservative interests intend to bring action to halt Biden’s executive action. However, nothing is certain yet, so stay informed. Above all, be ready to take advantage of the Joe Biden student loan forgiveness plan as soon as possible.

CollegeAdvisor.com is here to help with the financial aid and college application process. We offer one-on-one advising on all aspects of college admissions. We also provide resources like this FAQ session with Admissions Officers, more information on college tuition costs, and this college financial aid webinar about how to consider the cost of college when building your college list. Read about how our students afforded Duke, Harvard, Columbia, and the University of Chicago.

The college admissions process and college tuition costs can feel overwhelming. However, CollegeAdvisor.com is here to help with detailed financial aid advice. Also, subscribe to the Department of Education’s email list for updates on student loan debt relief programs. 

This news article was written by Laura Frustaci, Harvard ’21. No matter what stage you are at in your college search, CollegeAdvisor.com is here to help. To get one-on-one advising with an Admissions Expert, create your free account or schedule an advising consultation by calling (844) 343-6272.