While broad student loan forgiveness has been a priority for Democrats in the last several years, plenty of experts seem to agree that President Biden does not have the authority to forgive student debt via executive action. However, it appears student loan forgiveness is again gaining some traction, and that the administration may move forward with some sort of plan anyway. According to insiders, President Biden is planning to stay true to his campaign promise of getting at least $10,000 per borrower in federal student loans forgiven in 2022.
While the official plan is yet to be released, experts say the forgiveness package being presented will be tied to income, thus cutting off financial aid for student borrowers who earn more than average. PBS
That said, financial advisor Jay Zigmont says it’s important to remember student loan forgiveness has been a discussion for decades, yet not much has materialized.
With that in mind, you may want to take this news (and any other rumors about student loan forgiveness) with a grain of salt. At the very least, you should steer clear of making any drastic moves until you know for sure.
Student Loan Forgiveness: What To Do Right Now
If you believe you may qualify for student loan forgiveness within the next few months, you may also be wondering if there’s anything you can do while you wait. I reached out to higher education experts to find out what they think borrowers should do while they want to find out what happens, and here’s what they said.
Update Student Loan Contact Information
Student loan expert Mark Kantrowitz says borrowers who are hoping for forgiveness of federal student loans should update their contact information with their loan servicer and on studentaid.gov. Contact information that should be updated can include your address, your phone number, and your email address.
“That will let them contact you about loan forgiveness and provide you with an application form if forgiveness is not automatic,” he says.
In the meantime, do not make any payments that aren’t required, he says, adding that extra payments right now could reduce the amount of loan forgiveness that you ultimately receive. Instead, borrowers with federal loans should make sure all their contact information is up-to-date then wait to see what happens.
Prepare For Loan Payments To Resume
According to Will Geiger, who is the founder of scholarship website Scholarships360, borrowers with federal student loans should also prepare for payments to resume after August 31, 2022 — the date the current pause on payments and fixed 0% interest rate period is slated to end .
Geiger adds that the best way to do this is for students to know exactly what their monthly loan payment will be so they can budget accordingly. This is important since loan forgiveness is not guaranteed to happen, and since nobody knows how much will be forgiven or whether income limits will apply.
“The smart financial move is to make sure that you are in a position to make your payments and assume there is no forgiveness,” he says.
Zigmont adds that, if you truly believe forgiveness is on its way, you can start putting your student loan payments into a high yield savings account to earn some interest while you wait.
“If forgiveness happens, you can just use the money for whatever you want,” he says. “If not, you can put it towards your loan.”
College Students Should Stay The Course
But, what about borrowers who are currently in college? Geiger adds that students who are currently in school should stay the course and refrain from radically changing their borrowing behavior. Instead of being tempted to borrow more money with the hope it will be forgiven, students should keep student loan borrowing to a minimum and instead apply for scholarships, apply for need-based aid via the FAFSA, and take advantage of work study programs when they can.
Geiger adds that one of the big unknowns of any potential forgiveness plan is whether it would affect students who are currently in school, or whether it will only apply to those who are currently in repayment. With that in mind, it’s wise to wait to see how any future forgiveness plan looks before changing the way you borrow or applying for more aid you don’t need.
Don’t Assume You Know The Details
Stanford University’s Dr. Kortney Ziegler adds that borrowers should understand that all current student loan forgiveness programs have requirements that must be distinctly followed to benefit from. “The potential Biden plan won’t be any different,” he says.
In fact, details like the job a borrower pursues to the number of repayments made on the loan could be qualifying factors for forgiveness. Worse, “it can take years for forgiveness to happen if it happens at all,” notes Dr. Ziegler.
As an example, initial reports on income caps for forgiveness signaled that individual borrowers who earn $125,000 or more and couples who earn $250,000 or more may be left out of any forgiveness plans suggested in 2022. However, recent reporting from PBS suggests higher income caps of around $150,000 per individual and between $250,000 and $300,000 per couple.
Since nobody knows how these details will actually look in the end, it’s best to wait and refrain from making assumptions on how much debt will be forgiven and who will qualify.
Know What You Do Qualify For Now
Short of blanket student loan forgiveness, President Biden has created several initiatives right now to provide relief for borrowers. This includes the Public Service Loan Forgiveness Waiver (PSL
These student loan forgiveness reforms are allowing borrowers who previously were not eligible for loan forgiveness to receive relief. However, they do require specific actions to take place by a certain time. For example, the PSLF Waiver requires you to consolidate your old FFEL loans into new Direct Loans by October 31, 2022.
Make sure you don’t miss these deadlines.
The Bottom Line
Will federal student loans be forgiven within the next few months? And if so, how much relief will individual borrowers actually see?
Unfortunately, the exact details of the plans in the works right now are yet to be released. This means that nobody knows what forgiveness will look like, much less details like the income limits that determine who will qualify.
Since there’s nothing to see on this front at the moment, the best bet for borrowers with federal student loans is sitting tight for now. Wait to hear from official sources on how any new loan forgiveness plans look, and refrain from making any financial moves that could impact the amount of forgiveness you might receive.
It seems more likely than ever some amount of federal student loan debt will be forgiven — at least for borrowers who meet income requirements. How much and when it will happen is anyone’s guess.