Biden’s $11.5 Billion In Student Loan Forgiveness: Some Is Automatic, Some Is Not. Here’s A Breakdown. - Forbes

Over the last 10 months, the Biden administration has announced billions of dollars in student loan cancellation. The administration has relied on executive authority, some of it emergency-based, to expand available relief under existing federal student loan forgiveness programs.

According to the Department of Education, these initiatives are expected to provide over $11.5 billion in student loan forgiveness for nearly 600,000 borrowers. In many cases, borrowers will not have to take any action, as the Department has indicated that it will be providing the relief automatically. But for other borrowers, action is required, and there might even be deadlines. Here’s a breakdown.

Student Loan Forgiveness For Borrowers Defrauded By Their School

The Biden administration expanded relief under Borrower Defense to Repayment, a program that cancels federal student loan debt for borrowers who have been defrauded by their college, university, or trade school.

The $1.5 billion in new student loan cancellation announced by the Biden administration will be provided automatically, and it only applies to certain borrowers who already have approved Borrower Defense claims. The administration reversed a Trump-era policy that had permitted the Department of Education to provide only partial relief for approved Borrower Defense claims. With the new changes, the Department will be canceling any remaining federal student loan balance for borrowers whose loans are covered by the new, expanded relief. No action is required, and the Department has already started notifying impacted borrowers.

Student loan borrowers who do not benefit from the automatic relief can, of course, submit a Borrower Defense application and potentially still benefit from the reversal of the prior partial relief policy. But a new application would still be subject to Department review and approval.

Student Loan Forgiveness For Borrowers Impacted By School Closure

The administration also announced $1.1 billion in student loan forgiveness for former students of ITT Technical Institutes, which shut down in 2016. This relief is being provided under the Closed School Discharge program, which wipes out the federal student loan debt for borrowers who were unable to complete their degree due to the closure of their school. Importantly, borrowers are only eligible for this discharge if they did not complete their degree program elsewhere, such as by transferring credits to another institution.

Most borrowers eligible for the expanded relief will not have to do anything. According to the Department of Education, “borrowers who are eligible for a closed school discharge and attended an [ITT] institution that shut down between November 1, 2013 and July 1, 2020 will receive an automatic discharge as long as they did not enroll in another institution within three years of their school's closure.”

Borrowers who did enroll at another educational institution, and other borrowers who did not attend an ITT institution in the first place, could still be eligible for a Closed School Discharge. But, they would need to complete and send in a Closed School Discharge application, which would be subject to review and approval.

Student Loan Forgiveness For Borrowers Working In Public Service

Earlier this month, Education Secretary Miguel Cardona announced that the Department of Education will be enacting significant changes to Public Service Loan Forgiveness (PSLF), a federal student loan forgiveness program that has long been hampered by complex rules and dismal approval rates.

Through a new “Limited PSLF Waiver” initiative, which will be available through October 2022, the Biden administration will temporarily relax some of the key PSLF program requirements by allowing more types of federal student loans, and all types of repayment plans, to “count” towards the 120 qualifying monthly payments that are required to obtain student loan forgiveness through PSLF.

Some of the relief will be provided automatically. For borrowers who already have all Direct-program federal student loans, the Department has indicated that over the next several months, officials will be auditing borrower accounts and their payment histories, and will update the qualifying payment counts for borrowers who had prior payments rejected as non-qualifying. Officials have already started sending out emails to borrowers with preliminary estimates of how many more PSLF payments may be added to their totals.

But for many borrowers, action will be required. Borrowers who have FFEL-program student loans may need to consolidate those loans through the federal Direct consolidation program. And many borrowers who want to obtain relief or credit under the Limited PSLF Waiver program will need to certify their employment by submitting the appropriate PSLF form.

Borrowers who need to take action would need to submit their required paperwork before October 31, 2022. The new PSLF relief program is complicated in its own way, and more guidance should be released in the coming weeks, so be sure to learn more about the program requirements (and any associated pitfalls) before taking action.

Student Loan Forgiveness For Disabled Borrowers

The Education Department announced it would be providing $5.8 billion in federal student loan forgiveness through the Total and Permanent Disability (TPD) discharge program for borrowers who are receiving Social Security disability benefits and have a disability review period of at least five years. The Department also announced another $1.3 billion in reversed loan reinstatements for TPD borrowers who had their previous disability discharges voided during the pandemic because of a failure to comply with post-discharge monitoring rules, which have since been waived. These discharges will be automatic; the Department will use data-sharing tools with the Social Security Administration to determine who is eligible.

Borrowers who don’t qualify for the automatic TPD discharges can still apply for relief by submitting a form completed by their physician certifying that they meet the TPD discharge standard.