President Joe Biden could extend the limited waiver on student loan forgiveness.
Here’s what you need to know – and what it means for your student loans.
Biden’s top student loan official, Richard Cordray, is lobbying the Biden administration to do so extend the limited government loan forgiveness waiver, which expires on October 31, 2022. As reported by Business Insider, Cordray expressed concern at a student loan conference this week that the limited waiver will expire before student loan borrowers can reap its many benefits. The limited waiver allows student loan borrowers to “count” previously ineligible student loan payments toward student loan forgiveness. These include, for example:
- Student loan payments from FFELP Loans and Perkins Loans count toward student loan forgiveness;
- Student loan payments prior to student loan consolidation will count toward student loan forgiveness;
- Student loan payments made under the incorrect student loan repayment schedule will count toward student loan forgiveness;
- late or incorrect student loan payments will count toward student loan forgiveness; and
- Student loan payments made while active military service—even if the borrower was enrolled in a temporary forbearance or forbearance on student loans—will count toward student loan forgiveness.
Student Loan Forgiveness: Borrowers need more time to qualify
The Biden administration announced major changes to student loan enactment last October. While student loan borrowers have almost a year to take advantage of the limited waiver, Cordray says more time is needed. The US Department of Education announced that Biden canceled $8.1 billion in student loans for 145,000 student borrowers who work in government and nonprofit organizations. However, the Student Borrower Protection Center says 9 million borrowers now qualify for student loan forgiveness. The bad news is that fewer than 15% of the 9 million public sector workers with student loan debt have filed records to track their student loan forgiveness progress. Bottom Line: More student borrowers are eligible for student loan forgiveness, but they’re not getting on track to foreclose on their student loans. Cordray said he will continue to push for a possible extension of the limited waiver, but Biden could be constrained by executive power.
Senators propose major changes to student loan forgiveness
As the Department of Education evaluates a possible extension of the limited waiver, two U.S. senators proposed significant changes to student loan enactment. U.S. Senators Sheldon Whitehouse (D-RI) and Jeff Merkley (D-OR) introduced the Simplifying and Strengthening PSLF Act to “streamline and improve” government loan forgiveness. Their proposed legislation would include:
- Student Loan Forgiveness in 5 Years: Reduce the number of student loan payments required to qualify for public loan forgiveness from 120 payments over 10 years 60 payments over 5 years;
- Count more student loan payments: To allow any previous period of student loan repayment shall be considered a qualifying student loan payment, regardless of the type of federal loan, the student loan repayment schedule, or whether the student loan payments were made in full or on time.
- Consolidate student loans again: Allow Parent PLUS loan borrowers and couples who previously co-consolidated their FFEL federal student loans to reconsolidate their student loans into one direct loan to be eligible for government loan forgiveness.
Student loans: next steps
Biden decides whether to enact large-scale student cancellation for millions of student loan borrowers. This historic student loan exemption could include $10,000 in student loan forgiveness, despite progressives in Congress urging Biden to cancel $50,000 in student loans. Biden has not commented publicly on whether he will extend the limited waiver beyond Oct. 31. Education Secretary Miguel Cardona and Cordray both said the moratorium on federal student loan payments could be extended. However, they have warned student loan borrowers to prepare for the resumption of federal student loan payments beginning September 1, 2022. If you haven’t prepared yet, here are some smart ways to pay off your student loans: