U.S. Student Loan Forgiveness: Biden Efforts and HELP

As the academic year unfolds, an undercurrent of uncertainty runs through the veins of American higher education. Each year, a number of post-secondary institutions shut their doors, leaving students grappling with substantial student loans and futures shrouded in doubt. In the United States, the consequences of such closures are not uniform, presenting a complex tapestry of outcomes for the affected students’ loan obligations.

For those caught in the throes of their institution’s closure, options vary. Some may sequester hope through teach-out plans or by transferring credits to welcoming institutions, while others face an abrupt halt to their educational pursuits, burdened by lingering financial obligations. Federal loan borrowers who find themselves enrolled at the moment of closure, or within a specified period post-withdrawal, can pin their hopes on a ‘closed school discharge’—a lifeline that, however, eludes students who complete their program through teach-outs or at different branches of their shuttered school.

For students ensnared by their institution’s misleading practices, the ‘Borrower Defense Loan Discharge’ offers a potential escape. Nevertheless, a recent effort by the Biden administration to streamline federal loan forgiveness for victims of school closures or deceptive conduct hit a snag, blocked by a federal appeals court. Looking ahead, regulations set to take effect on July 1, 2024, aim to fortify protections by mandating at-risk institutions to provide transparent financial aid information and establish teach-out plans.

Private student loans, however, remain a wild card. Not under the Department of Education’s purview, these loans bring fewer protections to the table. While lenders like Sallie Mae may offer concessions in some circumstances, the stark reality is that private loan borrowers typically must shoulder their debt solo, even if their educational institution dissolves. Some states have extended a lifeline through tuition recovery funds, while legal strategies leveraging the ‘holder in due course’ clause are still in their infancy.

Amidst this landscape, the temporary Biden administration student loan forgiveness program approaches its deadline. To date, it has sanctioned loan discharges amounting to billions of dollars for hundreds of thousands of borrowers. Eligibility hinges on a web of factors, including employment with a qualifying public entity and ownership of Federal Direct loans. Specific programs, ranging from PSLF to the Nurse Corps Program, to Teacher Loan Forgiveness, each with their unique requirements, beckon those seeking absolution from their debts.

The Department of Education’s IDR Account Adjustment acts as a salve, offering substantial debt relief to borrowers previously ensnared in forbearance, deferment, or suboptimal repayment plans. This program alone has erased over $44 billion for more than 900,000 individuals. The deadline for total loan forgiveness under this initiative has been extended to April 30, 2024, and is accessible to both public and private sector workers, inclusive of PSLF participants. The IDR Waiver, offering retroactive credit for income-based repayment since July 1, 1994, expedites the forgiveness journey. Borrowers with antiquated federal student loans may need to consolidate to benefit from the IDR Waiver, with a deadline of April 30, 2024, looming for consolidation loan applications.

President Biden’s declaration on August 24, 2022, promised the cancellation of federal student loans up to $20,000 under the HEROES Act of 2003. Despite legal roadblocks, the President remains resolute in advocating for broad debt relief under the Higher Education Act of 1965. His administration has championed the cause of students defrauded by closed colleges, extended relief to disabled students, and introduced an IDR account adjustment to simplify eligibility for the Biden Student Loan Forgiveness Application 2023. With the government’s green light for up to $20,000 in forgiveness, President Biden aims to waive $10,000 in debt for individuals earning under $125,000 yearly, or $250,000 for joint filers, with an additional $10,000 for students from low-income backgrounds. Applications are being processed swiftly, with a December 2023 deadline for submissions.

Student loan forgiveness in the wake of school closures remains a pivotal issue. Various federal and state-sponsored programs offer a financial reprieve. The President has underscored his commitment to expanding income-driven repayment plans, refining the Public Service Loan Forgiveness program, and providing $10,000 in student loan forgiveness for federal borrowers. The contours of these programs are subject to political and legislative shifts, but their potential to alleviate borrowers’ financial strains cannot be overstated.

Hawaii’s recent initiative—the Healthcare Education Loan Repayment Program (HELP)—exemplifies proactive state-level intervention. Announced in September 2023 by Governor Josh Green, HELP earmarked $30 million to alleviate educational loan debt for licensed or certified healthcare professionals in Hawai’i. About 500 healthcare workers have already seen up to $50,000 of their educational loans forgiven. The program, awash with applications, plans to sustain its momentum for another 5 to 6 years, promising a broader impact across the healthcare sector.