Navient, one of the largest student loan servicers, will cancel $1.7 billion in private student loans to settle charges that it issued loans to borrowers who couldn’t afford to repay them.
Although the settlement impacts only a small percentage of borrowers, a larger group of borrowers may also be eligible to have a portion of their loans forgiven.
The federal public service loan forgiveness (PSLF) program, which typically allows public service workers to qualify for forgiveness after 120 loan payments, has become more accessible.
After facing criticism for undercounting eligible payments, the Department of Education introduced a temporary waiver that makes partial payments and late payments count toward forgiveness.
In addition, if borrowers consolidate their Family Federal Education Loan (FFEL) loans (government-guaranteed loans issued by private lenders before 2010, when the program was ended) into the government’s direct loan program, prior FFEL payments will also count toward forgiveness, provided the borrower was working full time in a public service job at the time of the payments.
Borrowers whose loans are not already in the direct loan program must consolidate their loans into the direct loan program by October in order to qualify for this relief, says Mark Kantrowitz, author of “Who Graduates From College? Who Doesn’t?”
Meanwhile, the nearly two-year suspension of federal student loan payments — scheduled to end May 1 — could make it easier for borrowers in the PSLF program, as well as borrowers in an income-driven repayment plan, to have a portion of their loans forgiven.
While payments on federal student loans have been suspended since March 2020, PSLF borrowers have been credited as if they made payments during that period. That could add 26 months toward the payment requirement for PSLF applicants.
Likewise, the months when payments were suspended will count toward the 20 to 25 years of payments (depending on the plan) required for borrowers in the income-driven repayment plan to qualify for loan forgiveness. That should also have the effect of lowering the total amount they repay over the life of their loans.
Although blanket loan forgiveness seems unlikely in the current political climate, there may be targeted relief for different groups, such as teachers or health care workers, as well as parent borrowers who may be buckling under burdensome debt, says Andrew Pentis, a certified student loan counselor at Student Loan Hero, at Lending Tree.
Borrowers who are facing bankruptcy or are in bankruptcy may also be candidates for relief.
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