Student Loan Cancellation 2022: Here’s What You Need To Know

Student loan cancellation

Since President Joe Biden committed to forgiving $10,000 for each borrower on the campaign trail, federal student loan borrowers have wondered if their debt will be canceled. But will there be a student loan cancellation

Forbearance on federal student loans expires on May 1. During the pandemic, most loan borrowers will not have made a payment for more than two years. Loan forgiveness has even been granted to some borrowers.

 However, most federal student loan borrowers will begin making monthly payments on the same outstanding debt they had when the crisis began when payments resumed.

Don’t Count On Student Loan Cancellation Just Yet. 

Although Biden has expressed support for extensive student loan forgiveness, he has yet to present a particular proposal since becoming president. Biden could utilize executive authority to cancel doubt.

While the debate over student debt forgiveness rages on, you should prepare for the possibility that your student loans will not be forgiven. 

Here are some essential things you need to know about student loan cancellation 2022. 

Student Loan Cancellation For Public Service Workers 

Early in October 2021, the Education Department announced revisions to its severely ineffective PSLF program, which was meant to provide debt relief to public employees. 

Changes canceled $1.7 billion in federal student loan debt for 22,000 students. In addition, the Education Department says that approximately $5 billion in PSLF loans had been canceled for 70,000 borrowers as of January 20.

Congress established the Public Service Loan Forgiveness program in 2007 to cancel the remaining debt on direct loans for public employees who had made 120 qualifying monthly payments or 10 years’ worth of payments. 

Before the revamp, however, the program dismissed 98% of borrowers who requested forgiveness due to several roadblocks in the approval process. As a result, PSLF borrowers will now be able to credit payments made under a student loan program that didn’t qualify in the past.

Student Loan Cancellation For Defrauded Borrowers 

Borrower defense claims, aimed at people who attended institutions that “engaged in particular misbehavior,” were initially introduced by the Education Department in March 2021 to make it easier to get debt relief. 

This indicates that the school used deceptive or illegal methods.

Around 72,000 borrowers who attended ITT Technical Institute, Corinthian Colleges, and American Career Institute benefited from this group’s first wave of forgiveness. The initial round of aid amounted to around $1 billion.

In July and August of 2021, more rounds of forgiveness for deceived student loan borrowers were announced. In July, another 1,800 borrowers from Westwood College, the Court Reporting Institute, and the Marinello Schools of Beauty learned that their loans would be forgiven, totaling $55.6 million in debt relief.

The $1.1 billion August batch of forgiveness extended the earlier round of a student loan cancellation to borrowers who attended ITT Tech but never graduated. According to the Education Department, around 43% of these debtors have defaulted. So this round benefited an extra 115,000 borrowers.

In September 2021, these borrowers had their student loans automatically discharged.

In February, Biden announced a $415 million round of student loan forgiveness for approximately 16,000 defrauded borrowers who attended DeVry University, ITT Technical Institute’s nursing program, Corinthian Colleges, Westwood College, Marinello Schools of Beauty, and Globe University’s criminal justice programs or Minnesota School of Business.

Approximately 20% of those forgiven were borrowers who had attended DeVry. In addition, the Education Department said had repeatedly misled prospective students across the country by touting an overstated job placement rate from 2008 to 2015.

Biden’s Stance On Student Loan Cancellation 2022 

Members of Congress have pushed Biden to eliminate $50,000 in debt per loan borrower. However, the president has stated that if he uses his ability to erase large amounts of debt, it will not exceed $10,000 per borrower.

Biden’s budget proposal for 2022 doesn’t include any provisions for broad student loan forgiveness, reducing the likelihood that it will become a reality. During his presidential campaign, he suggested forgiveness in the following situations:

  • Suppose you were a student at a public university or college. Students attending private historically Black colleges and universities and other minority-serving schools would be eligible as well.
  • If your annual income is less than $125,000, you are considered a low-income individual. The phase-out of this benefit was mentioned in Biden’s plan, but no further information was provided.
  • If the student loans were used to pay for your undergraduate education.

There are no details on which debts may be canceled, whether forgiven sums will be taxed, or whether defaulted loans will be deleted from borrowers’ credit histories because there is no formal forgiveness plan.

Student Loan Forgiveness For Teachers And Health Workers 

Senator Sheldon Whitehouse (D-RI)has sponsored two proposals to erase student loans in Congress. And it’s for the frontline healthcare professionals and teachers. 

The Frontline Health Workers Student Loan Forgiveness Act would do the following things:

Student loans for health care workers who made significant contributions during the Covid-19 pandemic would be canceled. And would include frontline health care workers who contributed to the medical response (e.g., patient care, medical research, or testing). This would apply to both private and federal student loans.

Student Loan Cancellation For Teachers 

Student loan cancellation

The bill was presented in the United States House of Representatives by Rep. Carolyn Maloney (D-NY).

The Improved Teacher Loan Forgiveness Act would:

  • raise the amount of student loan forgiveness offered to teachers.
  • Instead of $17,500 in student loan relief, grant $30,000 in relief.
  • would apply to teachers who are “well qualified” according to the Department of Education’s definition;
  • Other teachers will receive $15,000 instead of $5,000.

The bill was introduced in the United States House of Representatives by Rep. Elaine Luria (D-VA).

Student Loan Cancellation For Disabled Loan Borrowers 

The Education Department recently announced a massive $5.8 billion round of student debt forgiveness for 323,000 borrowers with “total and permanent” disability in August 2021. During Biden’s presidency, this was the highest round of student loan forgiveness in cash amount.

Borrowers with a total and permanent handicap must be identified through a data match by the Social Security Administration. The Social Security Administration determines whether a borrower is still able to work; many disabled veterans are eligible for this type of debt relief.

In September 2021, the U.S. Education Department began discharging these loans. 

According to the U.S Education Department, more than $7 billion has been released for more than 400,000 debtors with a TPD as of January 20.

How To Get Ready To Resume Your Payment 

1. Find Out if Your Information is Accurate 

You may have gone nearly two years without making a loan payment, and a lot can happen in that time. If you changed your surname, got married, moved to a different location, etc., make sure you update your information. 

However, if you don’t inform your loan lenders about your adjustments, they’ll presume you’ve disappeared. The student loan industry, believe me, does not want you to succeed – they want your money. 

Don’t allow them the opportunity to scam you over with further fees and penalties based on obsolete information. So check that your address, name, and bank account information are all current. Take a peek at your payment plan while at it so you don’t get caught off guard.

Also, if you know you’ll have trouble paying your debt, let your lender know ahead of time. You might be able to change to a payment plan that works better for you right now. But don’t wait until relief expires on January 31, 2022, to figure it out.

2. Make A Budget For Your Student Loans 

If you don’t keep track of your money, it will quickly disappear from your bank account. That is why you should budget. If you haven’t yet discovered the joys of budgeting, today is beginning. You can use a zero-based budget to manage your money wisely.

Simply list your earnings and deduct all expenses until you reach zero. But, of course, if you end up with a positive number, you’ll need to put those extra bucks to work. 

If you get a negative number, you have a lot of work. To put it another way, you’ll probably need to make some cuts or obtain a second job to supplement your income.

You can make additional money by delivering groceries with Shipt or Instacart, walking dogs with Rover, or driving for Uber.

3. Begin Repaying Your Student Loans Right Away.

The most common mistake people make during this debt relief time is not repaying their loans, even when they can.

If that describes you, you’re making decisions based on what you want right now rather than what’s best for your future. That’s a bad compromise.

Take advantage of the interest-free term instead. If you pay off your loans today, all of the money Sallie Mae would have made from interest will go toward your principal balance and your freedom.

4. Explore Other Federal Loan Forgiveness Programs 

Do you work for a charitable organization? Is your job in the government? Borrowers who participate in the Public Service Loan Forgiveness Program and work a minimum 30-hour week for an eligible company will be awarded credit for payments that have been suspended.

Other noteworthy news: President Joe Biden discharged $9.5 billion in loans for 563,000 people this year, including fraudulent and incapacitated borrowers.

 More than 47,000 current and former active-duty service members deployed to locations that qualify them for imminent danger or hostile-fire pay had their interest canceled retroactively.

If you fall into these categories, make sure you get a student loan cancellation.

Other Alternatives For Student Loan Forgiveness And Cancellation Programs To Consider 

Student loan cancellation

1. Income-Driven Repayment Forgiveness 

The federal government offers four different income-driven repayment programs that let you set your loan payments to a percentage of your monthly income. If you enroll in one of these plans, your remaining loan balance will be forgiven after 20 or 25 years, depending on your plan. 

These plans are best for people with significant debt loads compared to their income.

As part of the March 2021 American Rescue Plan, this forgiveness was made tax-free from December 2020 to December 2025. However, most loan borrowers won’t be eligible for income-driven repayment forgiveness until the early 2030s.

2. Public Service Student Loan Forgiveness 

Qualifying nonprofit employees with federal loans and the Federal government are eligible for Public Service Loan Forgiveness. After making 120 qualifying loan payments, eligible borrowers can have their outstanding loan balance erased tax-free. 

Through a limited waiver, the Education Department has broadened which payments on federal student loans count toward PSLF until October 31, 2022; currently, payments on FFEL and Perkins loans, late payments, and payments made on any repayment plan count as eligible payments retroactively.

3. Student Loan Forgiveness For Nurses 

Nurses with student debt have numerous alternatives for loan forgiveness, including Perkins loan cancellation, Public Service Loan Forgiveness, and the NURSE Corps Loan Repayment Program, which pays up to 85% of unpaid college debt for qualified nurses. 

Because few borrowers have Perkins loans and the NURSE Corps program is highly competitive, PSLF may be the most likely choice for most nurses.

4. Repayment Assistance Programs Provided By States 

In some states, licensed teachers, nurses, doctors, and lawyers may be able to take advantage of debt relief programs. 

For instance, the Mississippi Teacher Loan Repayment Program will pay up to $3,000 per year on undergraduate college loans to teachers with a specific teaching license for each year of full-time teaching in a defined geographical or subject region for a maximum of four years. 

Contact your state’s higher-education agency to see if you qualify for a program.

5. Student Loan Forgiveness For Military Members 

Loan forgiveness programs for military members in the Army, Navy, Air Force, National Guard, and Coast Guard may be available. For example, qualified soldiers and officers in the National Guard might receive up to $50,000 to pay off federal student loans through the Student Loan Repayment Program.

6. Perkins Loan Cancellation 

If you have federal Perkins loans can have up to 100% of your loans forgiven if you work for five years in a public service position. After that, approved borrowers will typically get a percentage of their loans forgiven incrementally for each year they work.

Teachers who work full-time in a low-income public school or teach qualifying courses like special education, math, science, or a foreign language are eligible for the Perkins loan teacher benefit.

Other Strategies To Pay Off Your Student Loans 

1. Make A Larger Payment Than The Minimum.

Paying extra on your student loans is the simplest and most effective way to pay them off. However, it is sometimes easier said than done.

You don’t have to pay double or treble; perhaps you can manage to spend an extra $20 or $50 per month. If it’s possible, go for it! Any amount you can pay beyond the bare minimum will help you pay off your student loans faster. 

Simply ensure that your extra payments are applied to your loan principal by your loan servicer. Then, increase the extra amount you’re paying over time as your circumstances allow.

2. Consider Your Job 

While we’re on the subject of work, there are a few ways that your regular job could assist you in repaying your debts. In exchange for working in a service role, various jobs provide student loan forgiveness.

Check whether your career ambitions correspond with the criteria for each student loan forgiveness program. For example, public servants, doctors, lawyers, nurses, federal agency employees, volunteers, and automotive workers may be eligible for student debt relief or forgiveness.

Some employers have begun to include student debt aid as part of their benefits package, so keep this in mind as you seek for your next job or inquire whether your present employer provides (or would consider providing) this benefit.

If you expect student loans to be a substantial financial burden, it may be worth negotiating something into your benefits package, even if it isn’t officially stated.

3. Consider Refinancing 

If you have good credit and high-interest rates, student loan refinancing is becoming a more common alternative.

When you refinance your student loans, you combine them into one by taking out a new loan from a private lender and using it to pay off your old one. Because they’re more financially solid now than they were when they took out the loan in the first place, many borrowers can get lower interest rates.

If you refinance your federal loans, you’ll lose access to government programs like income-driven repayment and student debt forgiveness. However, if you think refinancing is right for you, utilize this student loan refinancing calculator to see how much money you could save.

Final Thoughts 

It is strongly advised that you continue to pay your loans during this time to reduce your overall debt burden. However, if you haven’t been making payments, this is a good time because the interest rate is 0%. 

Calculate your payments and how to fit them into your budget using the loan simulator on studentaid.gov. Before making any significant financial decisions, always consult with your financial and tax professionals, especially if you want to use student loan cancellation programs.