Student loan borrowers were dealt a blow when the Supreme Court on June 30 struck down President Biden’s forgiveness plan. Hope, though, is not diminished yet, as there are still three primary, and potentially one more, alternative paths to achieve student loan forgiveness amid these legal transitions.
One favorable route to loan forgiveness can be through income-driven repayment plans. Borrowers enrolled in these plans have the chance to get their remaining debt canceled by the federal government after making payments for 20 to 25 years. The Biden administration’s recent relief of $39 billion for over 800,000 borrowers under these plans presents their potential.
Under income-driven repayment plans, borrowers’ monthly payments are capped based on their discretionary income, with some payments even dropping to as low as $0. The impending tax bill at the end of the repayment term has been addressed by recent legislation, ending the policy until at least 2025, with expectations of becoming permanent.
Furthermore, the Biden administration is planning to introduce the Saving on a Valuable Education (SAVE) plan, allowing many borrowers to pay just 5% of their discretionary monthly income towards their student debt. This new option could be a game-changer for borrowers struggling to repay their loans.
Another alternative route can be the Public Service Loan Forgiveness (PSLF) program for federal student loan borrowers looking for debt relief. This loan forgiveness program targets certain nonprofit and government employees, providing the opportunity to have their federal student loans canceled after 10 years or 120 payments.
While PSLF has faced challenges, the Biden administration has implemented improvements to make it more accessible. To qualify, borrowers must work for a government organization, a 501(c)(3) not-for-profit organization, or another eligible public service provider. They must also have federal Direct loans and make 120 qualifying ((i.e. 10 years of no missed payments), on-time payments under an income-driven or standard repayment plan.
But, despite its given challenges, the PSLF program holds a great potential for borrowers willing to commit to a decade of public service.
Besides these two main forgiveness programs, there are other often overlooked roads for specific professions. For instance, full-time teachers working for five consecutive years in a low-income school may qualify for up to $17,500 in loan forgiveness under the Teacher Loan Forgiveness Program.
Nurses, too, have their options with the Nurse Corps Loan Repayment Program, enabling certain nurses to have up to 85% of their student debt canceled. In addition to this, federal agencies offer student loan repayment assistance programs, offering up to $10,000 per year, totaling $60,000, for federal employees.
State-level student loan forgiveness programs also exist, such as New York’s Get On Your Feet Loan Forgiveness Program. This initiative aims to assist recent college graduates by providing student loan forgiveness on up to 24 months of payments.
In addition to the existing alternatives for student loan forgiveness discussed earlier, there is a unique and innovative approach that could potentially provide relief to qualified borrowers. This path involves private companies or corporations partnering with educational institutions or loan providers to offer debt relief programs.
Corporate-sponsored loan forgiveness programs: In this scenario, companies could create scholarship or loan forgiveness programs to support graduates who pursue specific fields of study or work in designated industries. This approach would be especially appealing to corporations seeking to attract and retain talented employees while also aligning with their mission and values.
The benefits for borrowers and employers: For instance, imagine a technology company facing a shortage of skilled software engineers. To address this need and simultaneously aid graduates with student debt, the company could establish a loan forgiveness program. Graduates who complete a degree in computer science and join their workforce would be eligible for partial or full loan forgiveness over a set period of employment.
Enhancing the student loan landscape: This new street of private-sponsored student loan forgiveness could complement existing federal and state initiatives. By involving private corporations, it provides an additional opportunity for borrowers to reduce their debt burdens. Besides, such programs create stronger ties between the corporate world and academia, encouraging the development of talent tailored to specific industries.
Considerations and fairness: While this idea holds promise, certain considerations have to be addressed. Companies must ensure that their loan forgiveness programs are accessible and beneficial to a wide range of borrowers. Fairness in program eligibility and transparency in selection criteria are essential to avoid favoritism or discrimination.
But, it’s strictly worthy to note that private student loans typically do not fall under federal forgiveness programs and such loans are rarely forgiven, usually only in cases of permanent disability or death. However, as previously discussed, private-sponsored initiatives may also provide a much-needed avenue for those with private student loan debt to find potential relief through corporate partnerships.
So, as with any novel approach, it’s essential to strike a balance between creating opportunities for borrowers and ensuring long-term sustainability for corporations. And education borrowers should explore forgiveness opportunities based on their occupation, particularly within their state, to make the most of these often underutilized options.