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Published: Jan 24, 2024 8 min read
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Federal student loan borrowers face a dizzying array of acronyms to memorize: IDR, PSLF and SAVE, to name a few. Now, a flurry of program updates is adding to the vertigo.

In January, the Biden administration unveiled major waves of student loan forgiveness coming for borrowers across three separate federal benefit programs. But the rollout of these updates have been marred by complex qualifications and mixed messaging.

“I will be the first to say that I can understand borrowers’ confusion right now,” says Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

On Jan. 12, the White House announced that folks enrolled in the new Saving on a Valuable Education (aka SAVE) plan who have been paying down their loan balances for at least a decade could see their remaining balances forgiven soon. Then, on Friday, President Joe Biden canceled an additional $5 billion for some borrowers in the Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.

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And all of this has happened while a broader student loan forgiveness program is being crafted in the background after Biden’s initial plan to forgive up to $20,000 per borrower failed when the Supreme Court struck it down last June.

Unsurprisingly, many borrowers have taken to social media to express their frustration over the rules and qualifications.

“I’m so confused. So should I apply for this SAVE thing now?” wrote one Reddit user. Another said they called their student loan servicer, MOHELA, and the representatives claimed not to have heard of SAVE. “What is going on?” the user wrote.

If you’ve tuned out on student loan news or need help decoding the various announcements, here’s a breakdown of the latest forgiveness developments.

Forgiveness due to ‘administrative inaccuracies’

The latest round of student loan forgiveness announced last week by the Biden administration is for $4.9 billion held by 73,600 borrowers in IDR or PSLF plans.

Under these programs, borrowers who enroll and pay down their loans for a specified period of time — between 10 and 25 years, depending on the program — should have their loans canceled. However, many borrowers who are potentially eligible for forgiveness have not had their payment history accurately counted.

To fix what it calls “needless hurdles and administrative inaccuracies,” the Biden administration has been executing a one-time payment count adjustment since last summer. In this process, the Education Department is recalculating how many qualifying months of payments a borrower has made to make sure the data is accurate.

The account adjustments are being automatically conducted on a rolling basis, and the Department of Education has been steadily announcing waves of borrowers who qualify for forgiveness through IDR and PSLF after their payment histories have been updated. In December, for example, the department said it forgave about $5 billion for roughly 80,000 borrowers after adjusting their payment histories.

So far, more than 1.7 million borrowers have seen their loans forgiven since the account adjustments began. The Education Department says it will continue the adjustments until July — which isn't soon enough for some borrowers.

“Some are frustrated that they have to wait for the one-time adjustment to be processed on their accounts,” Mayotte says.

Early forgiveness via Biden’s SAVE plan

Earlier this month, the White House announced that forgiveness through Biden’s SAVE program is coming sooner than originally planned.

Through SAVE, borrowers who have made between 10 and 25 years of qualifying loan payments can have their remaining balances forgiven. Initially, forgiveness through SAVE was planned to begin in July, but the White House now says borrowers will start seeing their balances zeroed out as early as February.

Borrowers who originally took out up to $12,000 of federal loans can get any remaining balance canceled after 10 years of qualifying payments. For every $1,000 above that amount, the repayment timeline extends by one year. For example, $13,000 can be forgiven in 11 years, $14,000 in 12 years and so on.

Undergraduate loans have a maximum repayment timeline of 20 years — regardless of the amount borrowed. For graduate loans, it’s 25 years.

To receive forgiveness, borrowers must enroll in SAVE. Currently, the plan sets your monthly payment to the equivalent of 10% of your disposable income. In July, the program will become more generous by pegging payments to 5% of disposable income.

So far, about 4 million borrowers have had their payments set to $0 because they have no disposable income, as defined by a formula based on the federal poverty level.

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Other tailored cancellation measures

Beyond the programs outlined above, the Education Department has been automatically canceling debt for certain vulnerable borrowers over the past several years, including folks who are "totally and permanently disabled" and people who were defrauded by their schools.

Forgiveness programs have long existed for these borrowers, but they were historically underutilized before the Biden administration made loan cancellation automatic for those who qualify.

Since then, more than 500,000 borrowers who are classified as totally disabled — meaning their condition keeps them from working and is not expected to improve — have had nearly $12 billion of loans forgiven automatically.

Over 1.3 million borrowers who were defrauded by their schools — i.e. borrowers who attended ITT Technical Institute, Everest College or similar institutions — have seen about $23 billion of debt discharged.

What about Biden’s broad student loan forgiveness plan?

Biden’s original plan to broadly cancel student loan debt failed because the Supreme Court ruled he didn't have the authority to unilaterally do so using a 2003 law called the HEROES Act. But in the wake of the decision, he vowed to find another legal avenue to forgive student loan debt for a large portion of borrowers.

Using his authority under the Higher Education Act, the president believes he found a solution.

Biden’s new plan for broad student loan forgiveness is now undergoing a formal rulemaking process. Public hearings to determine who, exactly, should qualify for this relief wrapped up in December, but the details haven’t been finalized.

“We’re all in a wait-and-see mode,” Mayotte says. “Waiting to see what the final rules look like sometime this summer and fall — and waiting to see if there will be court challenges and, if so, how successful they will be.”

Experts largely expect this new forgiveness plan to be much more tailored than Biden’s first one — which would have canceled between $10,000 and $20,000 of debt per borrower if they met certain income thresholds. Given that there are a ton of unknowns about this plan, Mayotte says that borrowers shouldn’t get their hopes up.

For now, she recommends going to studentaid.gov and utilizing existing options. Though the kinks are still being worked out, many of the federal student loan programs have been expanded recently. Once the dust settles and the programs are fully implemented, Mayotte says it should get much easier for borrowers to navigate.

“So is it extra confusing right now? Absolutely,” she says. “But is it worth it? It sure is.”

More from Money:

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Early Student Loan Forgiveness Applies to More Borrowers Than Originally Expected

Some Student Loan Borrowers’ Payments Paused Due to Billing Errors

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