Over the past seven months, the Biden administration has announced a series of initiatives to expand student loan relief under two key existing programs. The Ministry of Education says millions of borrowers will benefit from the new changes.
But several cohorts of borrowers continue to be excluded from new student loan relief extensions. And with President Biden reportedly considering an even broader student loan forgiveness initiative, many may be wondering if they will once again be left out.
Biden expands student loan exemption under PSLF and IDR
Last October, President Biden announced sweeping changes to the Public Service Loan Forgiveness Program (PSLF), which provides loan forgiveness to borrowers after 10 years of eligible employment in nonprofit or government work. . Dubbed the “Limited PSLF Waiver,” the temporary changes will allow the Department of Education to count repayment periods that would have previously been disallowed under the original PSLF rules, such as payments made under the wrong reimbursement or the wrong type of federal government. student loan.
Then, in April, the Biden administration announced major reforms to income-contingent repayment (IDR) programs, which are plans that tie a borrower’s monthly payments to their income and family size, and lead to possible loan cancellation after 20 or 25 years of repayment. Changes to the IDR will allow the Department of Education to make a one-time “adjustment” and count various loan periods – including repayment periods under any plan, as well as certain periods deferment and forbearance – for the duration of repayment of a borrower’s IDR.
Taken together, the “IDR adjustment” (as the ministry calls it) and the PSLF’s limited relief program will bring millions of borrowers closer to student loan forgiveness. The ministry estimates that at least 40,000 PSLF borrowers will see immediate forgiveness of their student loans as a result of the changes. And as part of the IDR initiative, “Any borrower whose loans have accumulated repayment time of at least 20 or 25 years will receive automatic discounting, even if you are not currently on an IDR plan.” .
But not all student borrowers will benefit from these changes.
FFEL Spousal Consolidation Loans Excluded from Student Loan Forgiveness Under IDR and PSLF Initiatives
A key feature of the limited PSLF waiver and IDR adjustment is that loan periods on former FFEL program student loans can count, as long as the borrower consolidates the FFEL loan into the Federal Loan Program. consolidation before the applicable deadlines (October 31, 2022 for the limited PSLF waiver and January 1, 2023 for the IDR adjustment).
There is, however, at least one type of FFEL loan that cannot qualify. FFEL spousal consolidation loans (also called spousal or spousal consolidation loans) previously allowed married borrowers to merge their separate federal student loans into one loan with a combined balance. Both spouses would then be jointly and severally liable for repaying the entire balance of the consolidated loan. Although this type of federal student loan is no longer issued (in part because it can become a major problem if borrowers divorce), thousands of borrowers are still struggling with these types of loans.
According to the Department of Education, “Spousal Consolidation Loans from the FFEL program are not eligible to be consolidated into the Direct Loan Program.” Because FFEL loans must be consolidated into the Direct Lending Program to qualify for the limited PSLF exemption and IDR adjustment, FFEL Spouse Consolidation Loans are effectively excluded from these initiatives.
Unconsolidated PLUS parent loans excluded from student loan relief under the IDR and PSLF initiatives
Federal Parent PLUS Loans are issued to the parent of an undergraduate student for the benefit of that student. But the student is not responsible for repaying the loan — only the borrowing parent is. Parent PLUS loans generally have higher interest rates than other federal student loans, and they don’t have access to the most advantageous federal loan repayment programs.
Parent PLUS loans may be eligible for PSLF and IDR, but only if consolidated into a Federal Direct Consolidation Loan. And even then, they can only access the Income Contingent Reimbursement (ICR) plan, which is usually the least affordable IDR option.
The Department of Education has made it clear that unconsolidated Parent PLUS loans will not be eligible for relief under the limited PSLF waiver: “Parent PLUS loan repayment time is not eligible for credit under of the limited PSLF waiver, even if you new direct consolidation loans by October 31, 2022.” The Department of Education did not specifically state that Parent PLUS loans are also excluded from the IDR adjustment. But since unconsolidated Parent PLUS loans are not eligible for IDR, it is very possible that they will also be excluded from these benefits.
Parent PLUS loans that were previously consolidated in the direct loan program could benefit from the PSLF and IDR initiatives, but only for the consolidation loan itself: “If you are consolidating (or have previously consolidated) a parent PLUS loan, the time repayment on the loan may be eligible for a credit to the PSLF” under the PSLF Limited Exemption.
Private student loans excluded from student loan relief under the IDR and PSLF initiatives
Private student loans are not eligible for the limited PSLF waiver and IDR adjustment. The PSLF and IDR programs are only available for federal student loans, and there is no way to convert a purely private student loan to a federal student loan. Direct federal consolidation loans can only repay other federal student loans, not private loans.
What about general student loan forgiveness?
Biden administration officials — and the president himself — have repeatedly said broader student debt cancellation is being seriously considered. No final decision has been made and no specific timeline has been announced, although White House officials have previously suggested they will make a decision before the end of the ongoing student loan payment pause, which is currently due to expire on August 31. 2022.
Since nothing has been announced yet, it is impossible to know who may be excluded from the general cancellation of student loans. Logistically, the easiest way to implement widespread student loan forgiveness on such a massive scale would be to make it universal and automatic. In such a scenario, it can be assumed that all borrowers with federal student loans could benefit (perhaps even Parent PLUS borrowers and FFEL Spouse Consolidation loan borrowers, although private loans would likely still be excluded) .
But the Biden administration is reportedly considering eligibility restrictions, in part to ensure the benefits of large-scale student loan forgiveness go primarily to low-income borrowers. These restrictions may be based on the borrower’s income, the borrower’s educational program, or the type of student loan they have. Given the repeated exclusion of some borrowers from the student loan relief initiatives announced by the administration, it would not be surprising if these borrowers were once again left out.
Further Reading on Student Loans
Biden’s new student loan forgiveness changes could end up costing some borrowers
If Biden enacts a broad student loan waiver, it could look like this
Want student loan forgiveness? To qualify, borrowers may need to do this first
Who qualifies for student loan relief under Biden’s huge new income-based repayment expansion