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Key Points:
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President Joe Biden has moved the forgiveness timeline forward for some borrowers who have signed up for the SAVE repayment plan.
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You might be eligible for accelerated forgiveness if you borrowed less than $12,000 in federal student loans and have been making payments for 10 years.
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The accelerated timeline moves forgiveness possibilities to February instead of July 2024.
Federal student loan borrowers have watched the Biden administration roll out several new programs to ease the burden of student loan repayments. Earlier this month, the Biden administration announced an acceleration of previously announced student loan forgiveness.
We will explore the logistics of this new student loan forgiveness timeline and how it might impact you.
What's Going On with Student Loan Forgiveness
Biden Administration Accelerates Student Loan Forgiveness for Some Borrowers: Early in 2024, the Biden administration announced a decision to move student loan forgiveness plans forward. Instead of waiting until July, eligible student loan borrowers may see their student loans canceled in February. The announcement pushes up forgiveness opportunities by five months.
If you borrowed less than $12,000 and have made 10 years’ worth of payments, then you could qualify for forgiveness next month.
Who Qualifies for the New Student Loan Forgiveness?
Not everyone with student loans will see their student loans forgiven next month. In order to be eligible for early forgiveness, you must meet the following criteria:
- Be enrolled in the Saving on Valuable Education (SAVE) plan, which is the newest income-driven repayment plan.
- Originally borrowed $12,000 or less in federal student loans.
- Have made 10 years' worth of payments.
If you borrowed less than $12,000 and have made 10 years’ worth of payments, then you could qualify for forgiveness next month. The catch is that you need to be signed up for the SAVE repayment plan.
If you originally borrowed more than $12,000, you still might qualify for the new forgiveness plan. However, the minimum number of years you must make payments will be a bit longer. For each additional $1,000 borrowed, the repayment period before forgiveness increased by one year. For example, if your original loan balance was $15,000, then you’ll need to make 13 years’ worth of payments under the SAVE repayment plan before your federal loans are forgiven.
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According to the Department of Education, this forgiveness will be especially helpful to borrowers who attended community colleges and low-income borrowers. With over 6.9 million borrowers enrolled in the SAVE plan, many carrying student loans will appreciate this news.
How to Prepare for Student Loan Forgiveness Opportunities
If you took out federal student loans to pay for school, it’s critical to read the new guidelines about your student loans. In the past, you wouldn’t see your loans forgiven for at least 20 years. Now, it’s possible to see your loans forgiven by making payments for at least 10 years. But you’ll need to follow all the rules to make this possibility a reality.
Here’s what to do:
- Know the rules: If you borrowed $12,000 or less in federal loans, you qualify for a 10-year forgiveness timeline. But that timeline increased by one year for every additional $1,000 in your balance.
- Sign up for the SAVE repayment plan: SAVE is the newest income-driven repayment plan option. You’ll need to sign up for this plan to potentially access the earlier forgiveness opportunities. Depending on your income, you might even qualify for $0 monthly payments. For example, a single earner with an income of $32,800 or less qualifies for a $0 monthly payment.
- Don’t miss any student loan payments: While forgiveness is on the table, it’s critical to stick to on-time monthly payments.
- Monitor your progress: As you make payments, you can watch your forgiveness date inch closer.
Also, stay on top of any changes to the student loan forgiveness landscape. The Biden administration implemented these changes, which means future administrations might do the same. You might even see your repayment timeline pushed even closer.
The Bottom Line
Many federal student loan borrowers will appreciate the acceleration of Biden’s forgiveness program.
If you have private student loans, there is no relief waiting in the wings. However, it’s possible to refinance your private student loans to lock in a lower interest rate and consolidate your payments. If student loan refinancing is on your mind, consider personal loan options.
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Sarah Sharkey is a personal finance writer with a Master's in Management from the Hough School of Business at the University of Florida. She enjoys helping people make better financial decisions and has written for numerous personal finance publications, including Money Under 30, Business Insider, and The College Investor. Sarah enjoys traveling, hiking, and reading when she is not writing.
