In early August 2024, the Department of Education sent emails to federal student loan borrowers. The email explained that President Biden planned to use the Higher Education Act of 1965 to cancel student debt. The message included a deadline of August 30, 2024 to opt out of the program.
A variety of factors will be considered to determine a borrower’s eligibility for student debt forgiveness. One absolute requirement, though, is that loan repayment has already begun by the borrower. Other factors include a repayment history of more than 20 years, earnings that are insufficient to support their debt repayment and amount of current debt exceeding the amount of debt when debt repayment began.
Student loan forgiveness does not eliminate all debt. The plan calls for different approaches based on whether the repayment plan is income-driven or not. Those with income driven repayment plans
who have less than $120,000 of income will qualify for forgiveness in the amount of current debt less the amount of the original debt at time of initial repayment. Those not in an income driven repayment plan would qualify for the lesser of the amount of current debt less the amount of the original debt at time of initial repayment or $20,000.
Full details regarding qualifying for student loan forgiveness and the amount of forgiveness are promised this Fall. It is important to note, though, that a federal court has already issued a stay preventing the Department of Education from carrying out its previous plans for debt forgiveness. Whether this plan will be successful or not remains to be seen.