Student Loan Forgiveness Preview for 2024

This year has been somewhat of a mixed bag for student loan borrowers. On the one hand, President Biden’s signature mass student loan forgiveness plan – which would have erased up to $20,000 in federal student loan debt for millions – was struck down last summer by the Supreme Court. And after three and a half years of no payments and zero interest provided by the Covid-era forbearance, millions of borrowers returned to repayment this fall.

However, the Biden Administration has also managed to wipe out over $132 billion in student loan debt through so-called “targeted” loan forgiveness initiatives. Updated student loan forgiveness data released by the Education Department earlier this month, “make clear that the Biden-Harris Administration’s relentless efforts to fix the broken student loan system are paying off in a big way, with more than 3.6 million borrowers now approved for nearly $132 billion in loan forgiveness,” according to U.S. Secretary of Education Miguel Cardona in a statement in early December. “This level of debt relief is unparalleled and we have no intention of slowing down.” 

Efforts to cancel additional student debt are ongoing, but it is unclear how sweeping further initiatives will unravel. Here’s what borrowers can expect in 2024.

Targeted student loan forgiveness initiatives to continue

The Biden Administration’s efforts to enact targeted debt relief by utilizing existing student loan forgiveness programs appears to be succeeding, albeit at a much smaller scale than what was originally envisioned under Biden’s one-time student debt relief plan. Most of the $132 billion in student loan forgiveness approved so far falls into one of three groups:

• Waiver initiatives for Public Service Loan Forgiveness (PSLF) and Income Driven Repayment (IDR). The Limited PSLF Waiver, along with the subsequent related initiative called the IDR Account Adjustment, has permitted the Education Department to relax key program rules for PSLF and IDR and retroactively credit borrowers with time toward student loan forgiveness on 10-year, 20-year, or 25-year terms (depending on the program). Over 850,000 borrowers have received student loan forgiveness under the IDR component of these waivers, and nearly as many have received loan forgiveness through PSLF. The Limited PSLF Waiver has ended, but the IDR Account Adjustment is ongoing. Some borrowers may need to consolidate their loans via the federal Direct consolidation program to qualify or maximize benefits under the initiative, and the Education Department recently extended the consolidation deadline to June 30, 2024. Relief will be ongoing, and the program is expected to be fully implemented by July 1, 2024.
• School–related student loan forgiveness initiatives. The Biden Administration has approved billions of dollars in student loan forgiveness under two discharge programs designed to remedy certain types of school misconduct and related problems: the Borrower Defense to Repayment program, and the Closed School Discharge program. While relief under these programs is ongoing, new regulations enacted by the Biden Administration to expand loan discharge eligibility have been blocked by the Fifth Circuit Court of Appeals in response to a legal challenge brought by schools. That case may ultimately get decided in 2024, and the outcome could determine whether these new, more borrower-friendly rules can ultimately take effect.
• Disability discharges. The Education Department has approved at least $10 billion in loan discharges for borrowers with medical impairments via the Total and Permanent Disability (TPD) discharge program. Between a data-sharing initiative with the Social Security Administration allowing for automatic discharges for certain borrowers receiving disability benefits, and new rule changes that went into effect on July 1 that expand or relax key requirements, more borrowers are receiving relief under this program, and that should continue next year.

New student loan forgiveness plan in the works

The Biden Administration is also in the process of developing a new student loan forgiveness plan to replace the one that the Supreme Court struck down last summer. This plan is being created through the Higher Education Act (HEA), a different statute than the law that was the Administration’s basis for Biden’s first student loan forgiveness initiative.

The details of the HEA plan are still being hashed out. But so far, it appears that this new loan forgiveness program will be more narrowly tailored than the first one. While Biden’s initial student debt relief plan was broadly available to all borrowers with government-held federal student loans who had earnings within program guidelines, the new plan will target four categories of borrowers for relief, such as those who owe more now than what they originally borrowed, and those who qualify for existing student loan forgiveness programs but haven’t applied. 

The status of a fifth category of borrowers based on hardship remains unclear. The Biden Administration held a series of rulemaking sessions this fall to examine and modify draft regulations governing the new student loan forgiveness program. But the Education Department has not released draft regulations for the hardship category, leaving negotiators on the rulemaking committee frustrated with Department officials. It is unclear if the Department will hold additional rulemaking sessions in 2024 to evaluate hardship eligibility.

Finalized regulations governing the new student loan forgiveness program are expected to be published in May 2024. The program may not go live until 2025, although Biden Administration officials could exercise early implementation authority under the HEA to allow the plan to be available sooner than that. Regardless, observers widely expect the new plan to face legal challenges.

New SAVE loan forgiveness regulations take effect in July

Biden’s new SAVE plan – an IDR program designed to be more affordable than most other repayment options (particularly for undergrad loan borrowers) – is being implemented in phases. SAVE is available now and features a higher poverty exclusion limit (allowing single borrowers earning under $32,000 to pay $0 per month on their loans), as well as a generous interest subsidy that waives any interest that exceeds a borrower’s monthly payment, effectively ending any future negative amortization.

Next July, additional features of SAVE will take effect. This includes a more favorable repayment formula – particularly for undergraduate borrowers, which could lower their student loan payments by up to 50%. In addition, certain undergraduate borrowers with original balances of under $20,000 could see accelerated IDR student loan forgiveness in as little as 10 years, compared to 20 years or 25 years for other borrowers on IDR plans.