Will student loans be forgiven? When answering this question in 2021, it helps to know that President Joe Biden has already cancelled more student loan debt than any other US president. That’s a total of US$9.8 billion so far in targeted cancellations.
A poll from 2019 found that 58% of voters support cancelling all federal student debt, proving the widespread impact of these debts on American graduates. In the Class of 2019 alone, 69% had taken out student loans averaging US$29,900 in debt. The bigger picture is even more shocking: 44.7 million of American borrowers owe over $1.71 trillion in student loan debt.
So if you’re reading this, you may be wondering: will student loans be forgiven for you? Here’s what we know so far.
Biden administration makes strides
Though student loan forgiveness schemes are not new in the US, the Biden administration is overhauling critical programmes. This includes the Borrower Defense to Repayment, Total and Permanent Disability Discharge (TPD), and Public Service Loan Forgiveness (which has a shocking denial rate of 98%). It will be done via public hearings from October onwards.
So far, the Biden administration has cancelled US$1.5 billion student loan debt through the Borrower Defense to Repayment programme. This programme is exclusively for students who were “misled, defrauded, or otherwise harmed by predatory colleges and universities”.
In other words, you could get your debt cancelled if you have evidence your university wronged you. This will be particularly useful for students who attended ITT Technical Institutes — a national chain of for-profit schools that shut down after being investigated for wrongdoing back in 2016.
Though it is not new (it traces back to the Obama era), a recent policy change allows complete loan forgiveness, instead of only a partial one. Is there a way to qualify for this? Well, Forbes suggests consolidating your student loans into a Direct Consolidation Loan — “which would then qualify for student loan cancellation under borrower defense to repayment.”
Will student loans be forgiven for other groups, too? The signs are positive. Most recently in August, the government forgave US$1.5 billion student loan debt for over 323,000 permanently-disabled borrowers. Eligible graduates need not apply for tax-free relief; they will automatically be identified through administrative data matching.
Will student loans be forgiven for more graduates?
If you’re still asking this question, you are probably referring to wide-scale student loan cancellation. Well, the president has only forgiven loans for targeted groups in need so far — the cheated and disabled topping the list. We can therefore expect federal loan forgiveness to expand in the near future.
Besides the above, Biden also cancelled over US$1.3 billion for 41,000 borrowers in March. His loan forgiveness adds to the US$110 billion that former President Trump cancelled. Together with the US$2.2 trillion Cares Act — which has been extended until January 2022 — these signify greater understanding and concessions for students struggling to repay student loan.
At the same, as personal finance author Zack Friedman writes in Forbes: “Student loan cancellation may help more borrowers, but that doesn’t mean Biden will cancel everyone’s student loans.” Borrowers who earn up to US$125,000 per year may be considered in future rounds.