Millions of borrowers are eligible for newly announced student loan forgiveness initiatives. But at the same time, many of those borrowers who won’t have their loans fully cancelled will be resuming repayment on their remaining balances in a matter of weeks.
After nearly three years and several extensions, the ongoing Covid-related student loan pause is set to end on December 31, and there are no signs that it will be extended again.
“We’re relieving student debt, but we’re also resuming student loan payments that are paused during the pandemic,” said President Biden in public comments this week. “Come January, folks whose debt isn’t fully canceled… are going to start paying their student loans again.”
Student loan borrowers should start taking steps now to maximize their loan forgiveness opportunities and prepare for repayment. Here’s what you can do.
Review Student Loan Forgiveness Programs
The Biden administration has rolled out multiple new student loan forgiveness programs in recent months, and there are still opportunities to apply. Borrowers should take the time now to evaluate their potential eligibility and determine what, if any, steps are required to receive the benefits. Here are some of the more significant student loan forgiveness initiatives currently available:
- Biden’s one-time student loan forgiveness initiative can cancel up to $20,000 for qualifying borrowers. The program is currently subject to a temporary stay by a federal appeals court, but the Education Department is still accepting applications.
- An IDR Account Adjustment initiative will temporarily allow many past loan periods, including certain periods of deferment and forbearance, to count towards loan forgiveness under income-driven repayment plans, even for borrowers who are not currently in such a plan. This initiative may also benefit Public Service Loan Forgiveness (PSLF) borrowers who may have missed the October 31 deadline for the Limited PSLF Waiver. Some borrowers may have to take steps to qualify.
- The Education Department is in the process of finalizing a settlement to resolve a class action lawsuit over Borrower Defense to Repayment, a program that provides federal student loan cancellation for borrowers who were misled by their school. The Biden administration has proposed a broad settlement that could benefit borrowers who attended dozens of institutions. But there’s only a few more days to act before the settlement may ultimately be approved.
- The Biden administration has temporarily relaxed post-discharge monitoring requirements for the Total and Permanent Disability (TPD) Discharge program, which can cancel the federal student loan debt for borrowers with severe medical conditions.
Find Out If Your Student Loan Servicer Has Changed
While most federal student loans have been on pause since March 2020, much has changed within the federal student loan system. Multiple loan servicers have left the Department of Education’s Federal Student Aid system, and new servicers have stepped in. Somewhere between 10 and 20 million borrowers have experienced loan servicing changes since the payment pause began — and many may not even realize it.
Some of the biggest changes involve Navient transferring its entire government-held federal student loan portfolio to Aidvantage. And MOHELA has taken over the Public Service Loan Forgiveness (PSLF) program from FedLoan Servicing. Other accounts that were previously with FedLoan Servicing have been transferred to other loan servicers, such as EdFinancial.
Borrowers should check on their current federal student loan servicer details by logging in to their Department of Education account at StudentAid.gov. If you have a new loan servicer, be sure to also set up an online account with that new servicer to get the most up-to-date loan details and communications regarding your student loans.
Update Your Contact Information With Your Student Loan Servicer
Much has changed for many student loan borrowers since March 2020. You may have moved, or gotten a new phone number or email address. As repayment is set to resume, now is a critical time to make sure your contact information is up to date with the Department of Education and your student loan servicer. Missing important correspondence about repayment or student loan forgiveness opportunities could cause significant problems.
Take Advantage of Fresh Start To Get Your Student Loans Out Of Default
For borrowers with defaulted federal student loans, the Education Department is offering a one-time opportunity called the Fresh Start initiative that will allow many borrowers to get out of default and restore their loans to good standing. Getting out of default is important not only to avoid damaging outcomes like ongoing negative credit reporting or wage garnishment, but it also may be necessary in order to qualify for some student loan forgiveness programs.
Fresh Start isn’t available yet, but it should be by January. You can learn more here.
Certify Your Employment For Public Service Loan Forgiveness (PSLF)
Borrowers seeking Public Service Loan Forgiveness (PSLF) — a student loan forgiveness program for borrowers working for nonprofit or government organizations — can only receive credit for “qualifying payments” if they submit PSLF Employment Certification forms. Borrowers must periodically resubmit a new certification form signed by their employer to get updated PSLF qualifying payment counts.
While the Limited PSLF Waiver has ended as of October 31, borrowers can still receive retroactive credit for PSLF, and in fact can only do so by continuing to periodically resubmit the PSLF Employment Certifications. If you haven’t certified your PSLF employment in awhile, now is a good time to do so. You can start the process using the Department of Education’s PSLF Help Tool.
Borrowers On Income-Driven Repayment (IDR) Plans Should Prepare for Repayment
Borrowers who were on an income-driven repayment (IDR) plan when the payment pause began in March 2020 should return to the plan they were in, at the payment amount they were paying before, when payments resume in January (provided they have not applied to switch plans or recalculate their IDR payments). Borrowers will not have to re-certify their income for their IDR plan until sometime in 2023.
Borrowers who were on an IDR plan but have experienced a change in financial circumstances since 2020, such as a loss of work or a reduction in income, may want to consider requesting a recalculation of their IDR payments before January. Borrowers have a right to request a recalculation of their IDR payments at any time based on changed circumstances. You can start the process here.
Evaluate Student Loan Repayment Plan Options
For all student loan borrowers, now would be a good time to evaluate your repayment plan options. Borrowers can get monthly payment estimates under all available repayment plans by using the Department of Education’s Repayment Simulator.
Borrowers who cannot afford their monthly payments under a Standard, Extended, or Graduated plan may want to consider an IDR plan instead. The Education Department is also in the process of developing a new IDR plan, and details on that may be released before January.