Student loan forgiveness has been a top priority for President Biden during his presidency. He has proposed forgiving $10,000 per borrower, but he does not have the legal authority to forgive student loans on his own.
However, he has already forgiven more than $25 billion in student loans, using student loan forgiveness programs that have previously been authorized by Congress. As the executive, he's been able to streamline and fix programs that already exist to ensure that borrowers who qualify get the student loan forgiveness they deserve.
Learn how President Biden has forgiven the most student loans to-date, and how to qualify for these student loan forgiveness options.
Borrower Defense To Repayment
The Trump administration delayed processing of borrower defense to repayment discharge applications for years, tried to change the rules retroactively, tried to implement partial discharges, rejected applications without reviewing them and generally acted in bad faith to deny borrowers the borrower defense to repayment discharges for which they were eligible.
The borrowers filed a class action lawsuit the U.S. Department of Education, seeking an end to further delays and proper processing of their applications for discharge. (Sweet v. Cardona, Case No. 19-cv-03674-WHA, U.S. District Court, Northern District of California)
The Biden Administration decided to settle this lawsuit. The settlement will provide billions of dollars of discharges to about 200,000 borrowers who attended 153 colleges. (The full list of for-profit colleges appears in Exhibit C starting on page 60 of the PDF document containing the settlement.) It will also remove related derogatory information from the borrower’s credit histories. Borrower defense to repayment applications that have not yet been processed will be processed in a timely manner, according to a schedule specified in the settlement agreement.
The borrower defense to repayment (20 USC 1087e(h) and 34 CFR 685.206(c) and 34 CFR 685.222) provides for the cancellation of a borrower’s federal student loans when the college violated federal or state laws or engaged in a substantial misrepresentation concerning the borrower’s student loans or the educational services paid for using the student loans. If a borrower qualifies for the borrower defense to repayment discharge, the borrower’s federal student loans will be cancelled and all previous payments refunded to the borrower.
Although this lawsuit concerns borrowers who previously submitted an application for the borrower defense to repayment discharge, eligible borrowers can continue to submit applications at studentaid.gov/borrower-defense/.
Important Note For Timing: If the settlement is approved, it will apply not just to borrowers who filed claims before June 22, but also to borrowers who file claims after June 22 but before the court approves the settlement. A hearing is scheduled for July 28. In particular, the settlement provides that these borrowers will have their applications processed within three years, and if they aren't processed, their loans will automatically be forgiven in full.
The Biden has also approved other categories of borrower defense to repayment discharge claims, including $500 million to 18,000 borrowers who attended ITT Technical Institute (ITT) and $1 billion to 72,000 borrowers by rescinding the Trump Administration’s partial relief formula. Borrowers who attended DeVry University, Marinello Schools of Beauty and Corinthian Colleges have also qualified for the borrower defense to repayment.
Public Service Loan Forgiveness
On October 6, 2021, the Biden Administration announced a Limited PSLF Waiver that is in effect through October 31, 2022. The Limited PSLF Waiver counts all payments made by borrowers, including late and partial payments and payments made in any repayment plan, toward Public Service Loan Forgiveness.
To qualify, borrowers of loans in the FFEL program must consolidate those loans into a Federal Direct Consolidation Loan before the deadline.
In addition, all borrowers must file a PSLF form using the PSLF Help Tool before the deadline. (Borrowers of FFELP loans must consolidate their loans first, then file a PSLF form, both before the deadline.)
About 22,000 borrowers received immediate loan forgiveness because of this change, and about 550,000 borrowers will eventually become eligible for loan forgiveness because of this change.
About 145,000 borrowers have qualified for $8 billion in student loan forgiveness under the Limited PSLF Waiver as of early June 2022.
In addition, more than 19,000 borrowers have qualified for $1.5 billion in PSLF and TEPSLF forgiveness without needing the Limited PSLF Waiver as of the end of May 2022.
The U.S. Department of Education also implemented an automatic data match with U.S. Department of Defense records to identify borrowers who were eligible for PSLF due to their military service.
The Biden administration is also reviewing previously denied applications for PSLF to identify processing errors that unfairly denied borrowers the loan forgiveness to which they are entitled.
Closed School Discharges
If a college closed while the student is enrolled or within 180 days of the student’s withdrawal, the student may be eligible for a closed school discharge of their federal student loans if they are unable to complete their education through a teach-out or by transferring credits to another school.
The Biden administration provided $1.1 billion in closed school discharges to 115,000 borrowers who attended ITT Technical Institute. This is in addition to the borrowers who attended this college and qualified for a borrower defense to repayment discharge.
Total And Permanent Disability Discharge
If a borrower is totally and permanently disabled, they may qualify to have their federal student loans discharged.
There are three ways to qualify for a Total and Permanent Disability (TPD) Discharge by demonstrating an inability to engage in substantial gainful activity.
- Department of Veterans Affairs (VA) determination of a service-connected disability that is 100% disabling.
- Social Security Administration (SSA) disability status determination with a next disability review scheduled for five or more years after the most recent disability status determination. This applies to either Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).
- Doctor certification of a severe disability that has lasted or is expected to last for at least 5 years or which is expected to result in death.
If the TPD discharge is based on the SSA determination or doctor’s certification, there is a three-year post discharge monitoring period during which the borrower cannot have earned income that exceeds the poverty line for a family of two. Otherwise, the repayment obligation will be reinstated.
The U.S. Department of Education is performing a data match with VA and SSA records to implement the TPD discharge automatically for eligible borrowers. This provided $5.8 billion in discharges to 323,000 borrowers automatically.
The Biden administration has also restored eligibility for $1.3 billion in TPD discharges for 41,000 borrowers whose loans were reinstated due to a failure to file paperwork during the pandemic.
Payment Pause And Interest Waiver
Editor's Note: Dates have been updated to reflect the most recent updates to the payment pause and interest waiver.
The paused payments under the student loan moratorium count as though they were made toward the 120-payment requirement for Public Service Loan Forgiveness (PSLF) and the 240 or 300 payment requirements for the forgiveness after 20 or 25 years of payments under income-driven repayment (IDR).
By the time the payment pause and interest waiver expires on December 31, 2022, borrowers of eligible loans will have benefited from 33 months of paused payments. That’s over a quarter of the requirement for PSLF and 10% or 12.5% of the requirement for IDR forgiveness.
That’s the equivalent of about $30 billion to more than 1 million PSLF borrowers and about $60 billion to more than 8 million IDR borrowers. This forgiveness has not yet been received by most eligible borrowers, so it’s not part of the overall $25 billion figure.
Only federal education loans held by or on behalf of the U.S. Department of Education are eligible for this forgiveness. This includes all loans in the Direct Loan program and certain FFELP loans for which title was transferred to the U.S. Department of Education or a guaranty agency. Commercially-held FFELP loans, most Federal Perkins Loans and private student loans are not eligible.
Borrowers of commercially-held FFELP loans and Federal Perkins Loans can make them eligible by including them in a Federal Direct Consolidation Loan. It’s a little late for this, given that the student loan moratorium is set to expire on December 31, 2022, but perhaps the payment pause and interest waiver will be extended an eighth time.
Tax Status Of Student Loan Forgiveness
The American Rescue Plan Of 2021 (P.L. 117-2) made all student loan forgiveness and discharge tax-free through December 31, 2025.
Without this change, the IRS would have treated the amount forgiven as taxable income to the borrower. It’s as though someone gave the borrower money to repay their student loans. The amount forgiven is reported to the borrower on IRS Form 1099-C. The federal government gives with one hand while taking back with the other.
But, because of this change, borrowers do not need to worry about the federal tax liability associated with the loan forgiveness. However, some states may still levy state taxes on student loan forgiveness.
President Biden has called for this tax-free status to be made permanent.
With all of these administrative process improvements and changes, President Biden has forgiven the most student loans of any president, and will likely be forgiving more as the rest of his term continues.
Mark Kantrowitz is an expert on student financial aid, scholarships, 529 plans, and student loans. He has been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. Mark has written for the New York Times, Wall Street Journal, Washington Post, Reuters, U.S. News & World Report, MarketWatch, Money Magazine, Forbes, Newsweek, and Time. You can find his work on Student Aid Policy here.
Mark is the author of five bestselling books about scholarships and financial aid and holds seven patents. Mark serves on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and is a member of the board of trustees of the Center for Excellence in Education. He previously served as a member of the board of directors of the National Scholarship Providers Association. Mark has two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU).
Editor: Claire Tak Reviewed by: Robert Farrington