Student Loan Forgiveness Updates: Top Questions Answered

While the pandemic brought its share of financial upheaval, it also offered some extra savings opportunities. For those with student loans, that included a payment pause that lasted until October 1, 2023.¹

However, for many the pause just put off the pain. The situation of those buried under student loan debt has attracted a great deal of attention, leading to a bevy of proposals aimed at easing the burden. The most sweeping plan, announced by President Biden in August 2022, would have made borrowers with federal loans under the U.S. Department of Education's William D. Ford Federal Direct Loan Program eligible for up to $20,000 in federal student loan debt cancellation if they met certain criteria.²

While that proposal was struck down by the U.S. Supreme Court in June 2023,³ additional initiatives have been introduced to assist borrowers. The environment continues to be fluid, but read on to find out what programs may be available to help you manage your loans—and budget.

1. What Programs Are Available To Ease or Erase Student Debt?

While Biden's wide-ranging proposal hasn't moved ahead as initially proposed, there are several promising alternative efforts to help borrowers manage student loan debt. Here are the highlights of some programs:

Saving on a Valuable Education (SAVE) plan

The SAVE plan is an income-driven repayment option that offers benefits to borrowers. It reduces payments to 5% of discretionary income, compared to the previous 10%. Additionally, the plan increases income protection by adjusting the poverty line threshold, which helps protect more of a borrower's income from being counted toward repayment. It also provides a full 100% interest subsidy, meaning that even if borrowers do not make payments on accrued interest each month, their loan balance will not grow. For borrowers with original loan balances of $12,000 or less, the plan reduces the time required for forgiveness by half.⁴

What to do: As of August 28, 2024, a federal court has upheld a stay issued in July 2024 that temporarily prevents the Department of Education from fully implementing the SAVE plan.⁵ However, borrowers with federal direct unsubsidized or subsidized, consolidated or grad PLUS loans may still apply to enroll in the SAVE plan. Borrowers already enrolled in the plan have been automatically moved to forbearance, which means they do not have to make payments, nor will the loans accrue interest. Your loan servicer will notify you about these changes.⁶

Public Service Loan Forgiveness (PSLF) program

The PSLF program is designed for individuals employed in public service roles, such as teachers, firefighters, military personnel and employees of qualifying nonprofit organizations. Recent updates to this program have helped many borrowers achieve loan forgiveness by revising how payments are counted. Notably, these changes include incorporating periods of nonpayment during the pandemic pause into the total payment count.⁷

To qualify for loan forgiveness under the PSLF program, borrowers must make 120 qualifying payments while working full time for a qualifying employer under a qualifying repayment plan. Those who have met this requirement will have their remaining loan balance forgiven. Borrowers who have not yet reached 120 payments may see their balance reduced as they continue to work toward forgiveness.⁷

What to do: The PSLF Help Tool explains what you need to know about the PSLF program, including how to confirm if you have a qualifying employer, and how your loan has been affected.

Employer-sponsored benefits

According to SHRM's 2024 Benefits Survey, 9% of employers offer student loan repayment.⁸ That is up one percentage point from 2023 and may continue to grow, with additional high-profile companies offering the popular perk.⁹

What to do: Talk to your human resources department to find out if your workplace provides this benefit. If not, it can't hurt to request it.

2. How Was I Supposed To Resume My Student Loan Payments?

Payments restarted on October 1, 2023, although interest began accruing on September 1, 2023. However, the Department of Education has provided an on-ramp period from October 1, 2023, through September 30, 2024, offering a reprieve from payments being considered delinquent, reported to credit bureaus, placed in default or referred to debt collection agencies.¹⁰

As that period comes to a close, you should begin making your payments if you haven't already. To find out more about your loan and payment information, visit StudentAid.gov. Click on the log-in menu to sign in with your Federal Student Aid (FSA) ID, then go to the “My Aid" tab. There, you'll see what you owe and directions for updating your information, as needed.

If you were previously enrolled in an automatic payment plan, you'll need to restart your autopay deduction, as payments won't start automatically.¹⁰

3. What Happens if I Can't Make My Payments?

If you need to lower your payment, look into an income-driven repayment plan or loan consolidation. But before you make a move, be sure to read all the details so you know the repercussions in terms of interest rates and loan terms.

4. If I Qualify for One of the New Debt-Relief Options, What Should I Do With the Funds I Had Set Aside To Pay These Loans?

If you discover you have more discretionary income each month thanks to having your debt reduced or eliminated, now is the time to review your financial goals and start a new savings habit (or reinvigorate one that has lapsed).

For shorter-term needs, consider a high yield savings account. With a longer time horizon, reap the attractive return rates of a certificate of deposit (CD).

As your budget becomes a little looser and you feel more financially confident, look into a longer-term asset like an individual retirement account (IRA). An IRA enables you to boost your net worth through the magic of compound interest, supercharging your future retirement as your nest egg accumulates.

Anytime you have a meaningful financial event—especially one like student debt relief that allows you to “reset"—it's an ideal moment to assess your future goals and make moves that will improve your overall financial well-being.

5. What Is Next for Student Debt Relief?

Widespread student loan debt cancellation may still be a possibility, as it's long been a priority for the Biden-Harris administration. However, given continuing uncertainty as the 2024 election nears, the process is expected to be lengthy, and there is no guarantee it will materialize. Therefore, it's important to create a plan to tackle your existing student loan debt.

The Bottom Line

Check now to ensure you're making payments as appropriate, or look into a new loan option if that fits your situation and goals. Then, start making a plan. If you were counting on relief that is not yet coming, it can be stressful to figure out how to stretch your income to make those payments. Now is the time to revisit your budget to identify changes you can make as you start building your savings. For more information on budgeting and saving, visit the Synchrony blog.