5 Ways Student Loan Borrowers Can Prepare For Changes This Year As Loan Forgiveness Dims

As President Joe Biden leaves behind a mixed student loan forgiveness legacy, Donald Trump is set to return to the White House in less than two weeks. And he’ll be inheriting a federal student loan system experiencing historic levels of turmoil.

Biden has had some significant success in dramatically improving the Public Service Loan Forgiveness and Total and Permanent Disability Discharge programs, while allowing more borrowers to receive loan forgiveness under income-driven repayment, or IDR, than ever before. However, Biden was ultimately forced to withdraw several student loan forgiveness initiatives. And the SAVE plan — a central feature of his student debt relief agenda — is on life support due to a legal challenge. Meanwhile, millions of borrowers are stuck in a forced forbearance, while others remain in default and are about to experience the draconian collections powers of the federal government.

Despite the uncertain environment, it’s not too late for borrowers to take some steps to avoid worst-case scenarios when it comes to their student debt. Here’s what you can do, starting this month.

Plan Now For Repayment Without The SAVE Plan Or Mass Student Loan Forgiveness

Not all student loan forgiveness programs are ending. Public Service Loan Forgiveness, TPD Discharges, and loan forgiveness under the Income-Based Repayment plan all remain available right now. But borrowers should move forward with the assumption that mass student debt cancellation — initiatives that would immediately wipe out the debt for millions of people all at once — is not happening.

The Biden administration has now officially scrapped plans to provide loan forgiveness to borrowers who have experienced runaway interest, those who first entered repayment more than 20 or 25 years ago, borrowers who attended so-called low-value institutions, and people who are experiencing personal and financial hardships. Trump is unlikely to revive these initiatives once he returns to the White House later in January. And the SAVE plan looks increasingly doomed, likely to be overturned by the courts or repealed by the incoming Trump administration.

That means borrowers will have to take a hard look at available repayment plan options for their student loans, without the SAVE plan. These include payment plans designed to pay off the loan balance over time such as the Standard, Extended, and Graduated plans. The general rule for these plans is that the longer the repayment term is, the lower the monthly payments will be, but the more the borrower will pay in total over time due to additional interest that must be paid over the longer repayment term. And there are other IDR plans to consider, as well, which tie a borrower’s monthly payment to their income.

Be Strategic About Pursuing Student Loan Forgiveness Under IDR Plans

Some borrowers may want to seriously explore IDR plans, if they are not already enrolled. Those who have been stuck in the SAVE plan forbearance may also want to start thinking about switching to a different IDR plan at some point, given the likely eventual demise of the SAVE program.

The Biden administration recently took steps to make the ICR and PAYE plans available again, in addition to the IBR plan. These are all IDR options. But all of these plans have different features, distinct repayment formulas, and eligibility rules that can block certain borrowers from enrolling, depending on the specific IDR plan. And payments under any these plans may be much more expensive than what they would be under the SAVE plan. It’s important to understand which IDR plan is best for your own situation. Use the Education Department’s loan simulator tool to estimate your monthly payments under various scenarios.

In addition, as we approach tax season, now is a great time for borrowers to look at their income and tax filing status to prepare for repayment in 2025, particularly for IDR plans. Monthly payments under IDR plans are typically based on the Adjusted Gross Income, or AGI, figure from the federal tax return. Borrowers should consult with a tax advisor to see if there are strategies to lower their AGI — such as by contributing more to retirement, or by filing taxes separately from their spouse — to reduce their AGI and, in turn, their student loan payments under IDR plans.

Check For Student Loan Forgiveness Credit Under The IDR Account Adjustment

One of the Biden administration’s more successful student loan forgiveness initiatives has been the IDR Account Adjustment. This program, which began in 2022, is designed to rectify historic problems with IDR plans that prevented many borrowers from progressing toward 20- or 25-year loan forgiveness. The initiative allows the Education Department to credit borrowers with time toward their IDR loan forgiveness threshold that may previously have not counted, such as payments made under other types of repayment plans, and certain deferment and forbearance periods.

Hundreds of thousands of borrowers have already received loan forgiveness under the program. The Education Department is in the process of finalizing implementation of the account adjustment now. Those who don’t qualify for immediate loan forgiveness could still receive a “bump” in IDR credit that advances their progress toward their 20- or 25-year IDR loan forgiveness milestone, reducing their remaining time in repayment.

Borrowers should keep an eye out for correspondence from the Education Department or their loan servicer in the coming months, as the department should be able to provide detailed information to borrowers on how much IDR credit they have, and how many months and years remain before they qualify for student loan forgiveness. This can help borrowers plan and prepare for their remaining time in repayment. Some servicers may already have this information, so borrowers can try contacting their loan servicer; just keep in mind, implementation of the IDR Account Adjustment is still ongoing, so servicer information may not necessarily be up-to-date or reflect the final “count” under the adjustment.

Do A PSLF Check-Up If Pursuing Public Service Loan Forgiveness

Those who are pursuing student loan forgiveness through PSLF may be particularly concerned about the current turmoil. Millions of PSLF borrowers have been negatively impacted by the SAVE plan legal challenges, unable to continue progressing toward loan forgiveness while in the forced forbearance. Others who want to pursue PSLF can’t do so if they are unable to enroll in an IDR plan, as IDR processing has been mostly suspended since August due to the injunction blocking the SAVE plan. And, to make matters even more fraught, the PSLF system just underwent a servicing platform change to StudentAid.gov that was only completed last summer, with some residual processing delays continuing.

Now is a great time for PSLF borrowers to evaluate their progress and make sure everything is in order as they continue to pursue student loan forgiveness. Actions should include:

• Check your PSLF Tracking details at StudentAid.gov to ensure that all payments have been properly credited.
• Certify your employment using the PSLF Help Tool if it’s been more than six to twelve months since your last employment certification. This is the only way your PSLF payments can get counted toward the 120 needed to receive loan forgiveness under the program.
• Get in the habit of monitoring your PSLF qualifying payment count. If you see an issue, you can request a review via the PSLF Reconsideration portal, but you only have 90 days to do so after receiving a letter regarding qualifying payments or qualifying employment.
• Evaluate whether you are on the best repayment plan for PSLF, particularly as the SAVE plan forbearance (which doesn’t count toward loan forgiveness) continues for now.
• Get in the habit of periodically downloading and saving key records including your PSLF Tracking details from StudentAid.gov, important letters and notices, and your payment history from your current loan servicer.

By staying on top of PSLF progress, borrowers may have a better chance of catching any errors, making it more likely that — despite the ongoing turmoil — they eventually will be able to receive student loan forgiveness under the program. More than a million borrowers have already been approved.

Get Out Of Default And On Track For Student Loan Forgiveness

Starting as soon as this month, the Education Department’s vast collections apparatus will start to turn back on again after a nearly five-year hiatus. This will put defaulted federal student loan borrowers squarely in the government’s crosshairs. Borrowers who remain in default on their federal student loans could soon be subject to draconian measures including negative credit reporting, massive collections costs and penalties, administrative wage garnishment, interception of federal tax refunds, denial of new federal student aid, and even offset of Social Security benefits.

The good news is that borrowers in default on their federal student loans have options — such as Direct loan consolidation and federal student loan rehabilitation — that can cure their defaults and restore their loans back to good standing again. This can allow them to pursue programs like IDR and PSLF, which could eventually lead to student loan forgiveness. Now is the time for defaulted student loan borrowers to evaluate their default resolution options and start taking steps to get their loans back into good standing again.