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Whether loan forgiveness is fair or legal is passionately debated across social media and in Congress—but there’s no doubt that it can be a lifeline for borrowers struggling with debt.
Since 2021, the Biden-Harris administration has announced a massive $127 billion in loan forgiveness for almost 3.6 million borrowers. A large part of that forgiveness has come from fixing logistical issues on existing forgiveness programs since Biden’s proposed debt relief plan for all borrowers was met with opposition and then shot down by the Supreme Court.
For people who qualify for forgiveness, what is the real-world impact on their bank accounts and financial outlook? Forbes Advisor talked to two borrowers to learn their stories and find out how forgiveness has impacted them financially.
Matt Lane, $330,270 Forgiven
Matt Lane, an attorney based in Washington, D.C., got approved to have about $330,000 in federal loans forgiven under the Public Service Loan Forgiveness (PSLF) program. Since graduating from law school and passing the bar exam in 2012, Lane has held numerous roles at state and federal government agencies that qualified him for forgiveness in 2023.
Lane left school with $250,000 in student loan debt, but that balance ballooned during repayment due to accruing interest. On the income-based repayment (IBR) plan, his monthly payments were slightly over $2,000 before the Covid-19 payment relief pause took effect.
“At that pay rate, at that amount, I had just hit the point where I was paying principal, and it was going down by one or two pennies per month.”
The approval for student loan forgiveness came right before payments resumed, which was welcomed news living in an expensive city with a young family. “I have a healthy salary, and it looks very good on paper, but if you are looking at, you know, making payments on $300,000 to $330,000 of debt, that becomes a big chunk of change every month pretty quickly,” said Lane.
Lane was drawn to a career in law because he wanted to help people and make a difference. He learned about loan forgiveness through his school’s career office after accepting a government fellowship—but there were a few bumps in the road on the path to forgiveness.
“I had a rough period where… [like] I think most people in the federal student loan program, your loans get shuffled around,” said Lane. One servicer told him he was all set for forgiveness only to find out one-third of his balance wasn’t in the correct loan type. The limited PSLF waiver measure that temporarily let ineligible loan payments qualify for PSLF helped him get approved.
Lane believes it’s important for people to recognize the value of programs like this. “Without family money, if you’re going to law school, you can’t work in public service,” said Lane.
“Without programs like this, I would not have been able to take the jobs that I took without having that sort of backstop there. And I would have been, you know, just another attorney defending corporations because that’s what I had to do to pay the bills.”
La Shaun Coronel, $20,874 Forgiven
La Shaun Coronel, a licensed social worker based in Augusta, Georgia, had a little over $20,000 forgiven under the PSLF program.
Her work in the Department of Family Services, nonprofits and the public school system helped her meet the employment requirement. However, she joined the Graduated Repayment Plan after school, not knowing payments under that plan wouldn’t count toward the 120 payments borrowers must make to receive PSLF.
Coronel took out loans for her bachelor’s and master’s degrees with the intention of repaying them, but paying both private and federal debt over several years was an uphill battle due to interest. “Because of the type of jobs that I do, we don’t make a lot of money,” said Coronel. “I talked to the Lord a long time ago, look… I don’t know how to work this out, but I need to be able to pay it, or you know, something has to give.”
Coronel contacted loan servicers to ask about moving to an income-driven plan to qualify for PSLF but was told it didn’t make sense to switch plans since the 10-year clock on her payments would start over. That was until Biden announced the temporary PSLF waiver, which meant payments already made under her graduated plan would be eligible for PSLF.
Loan forgiveness eliminated a monthly loan payment of $282. “I divided up the payment. So, some of it’s going into my household, some of it’s going to my other [private loans] and then some of it’s going into savings,” said Coronel.
Coronel doesn’t regret getting a bachelor’s degree in psychology but questions the ease with which student loans are offered for degrees that don’t push people far up the financial ladder.
“I feel like, especially for my age, we were told, ‘Okay, you go to college, get a degree and that’s how you do things,’” said Coronel. However, school didn’t lead to the American dream envisioned, and loans became a hindrance that tied her down.
Her financial journey inspired her to start a blog where she talks about budgeting, debt and money topics for women. Coronel’s long-term term goal is to open a practice that offers financial therapy and helps clients discover and improve their money mindset.
How To Get Student Loans Forgiven
While Biden’s proposed plan to forgive up to $20,000 for all federal loan borrowers is off the table due to the Supreme Court ruling, revamps to existing forgiveness programs and repayment plans have provided alternative routes to debt relief.
Below are ways borrowers can qualify to have federal student loans forgiven or discharged:
1. Through Employment
Teacher loan forgiveness offers $17,500 in federal loan forgiveness for teachers who work full-time in low-income schools for five years, and PSLF eliminates loan balances after borrowers make 10 years of qualified payments while working in the public sector.
Typically, only certain loans and payment plans qualify for PSLF. However, the Department of Education is making one-time adjustments to accept payments under different loan types and repayment plans. Check your loan account or contact your loan servicer for details.
2. Through an Income-Driven Repayment Plan
IDR plans set payments based on your income, and those payments could be as low as $0. If you stay on an IDR plan, federal loans may be forgiven after 20 to 25 years of repayment. Under the new SAVE plan, borrowers who graduated with under $12,000 in student loan debt may even qualify to have loans forgiven in 10 years.
Like the PSLF program, the Department of Education is processing one-time adjustments, allowing previously ineligible payments to qualify for IDR plan forgiveness. Contact your loan servicer for details.
3. If a School Closes
Loans may be discharged if your school closed while you were enrolled or 180 days after you withdrew. Loans may also be discharged if your school misled you, misrepresented itself or offered you loans inappropriately. You can apply for this discharge with loan servicers.
4. If You Become Disabled or Die
Federal student loans can be forgiven if you become permanently disabled, and you can find instructions for how to apply for a total and permanent disability discharge at StudentAid.gov. Loans can also be discharged when a borrower dies, and family members can apply for debt cancellation by providing documents like a death certificate.
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