How does student loan forgiveness work?

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    Team StellarFi

    Current federal student loan forgiveness programs allow eligible borrowers to have their federal student loan debt forgiven, or eliminated. There are multiple student loan forgiveness programs available, each with its own eligibility requirements and application process.

    These programs can erase some or all of your student loans after some time if you qualify. How soon and how much of your loan is forgiven depends on the type of income and your profession. Other qualifying factors include disability and being defrauded by your university.

    A few of the most popular student loan forgiveness programs include Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and income-driven repayment plans.

    During the COVID-19 pandemic, former president Donald Trump enacted an administrative forbearance on student loans which ended Sept. 1, 2023. Borrowers did not have to make monthly loan payments or the interest rates during this period. 

    In 2022, President Joe Biden announced a one-time student loan forgiveness plan that would forgive up to $20,000 per qualifying borrower. However, that plan was suspended after a 6-3 Supreme Court ruling in June 2023. 

    President Joe Biden’s administration now plans to introduce a new plan relying on the Higher Education Act (HEA) of 1965 which gives the United States Department of Education the ability to “compromise, waive or release loans.” Experts believe that this plan will face several legal challenges because the HEA has wider authority since it isn’t associated with a national emergency like HEROES. The plan will take time to materialize – at least a year according to many sources.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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