phd student loan forgiveness

Can Graduate Student Loans Be Forgiven? Yes, Here's How

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#1 Student loan lawyer

Updated on February 5, 2023

Graduate students have long carried a disproportionate burden of student loan debt, with nearly half of all federal student loan debt held by those with advanced degrees, according to a  recent report  from the Brookings Institute.

The harsh reality of deferred repayment and continuously accruing interest has led to ballooning balances for these individuals, who, despite being among the least likely to default, have seen their default rates rise in recent years.

With the COVID-19 pandemic driving an increase in graduate enrollment as undergraduate enrollment declined, the future looks even bleaker for these borrowers.

But as President Joe Biden aims to alleviate this crushing burden through his debt relief plan, the question remains: Will graduate student loans be included in this much-needed forgiveness?

Related: HBCU Loan Forgiveness

Biden’s student loan forgiveness

Last August, the president offered hope to federal student loan borrowers, including those who advanced their education through graduate or professional programs. The proposed loan forgiveness program could provide up to $20 thousand in debt relief for Pell Grant recipients and up to $10 thousand for other eligible borrowers.

But who’s eligible? If you made less than $125k as an individual or less than $250 thousand as a married couple filing jointly or head of household in 2020 or 2021, you’re in the running. The plan is open to those with undergraduate loans, Grad PLUS, and Parent PLUS Loans.

Related:   Student Loan Forgiveness Salary Cap

Here’s the catch: If you took out loans from private lenders, refinanced your federal loan, or combined both federal and private loans, Biden’s plan won’t be available to you.

White House infographic for student loan forgiveness

There’s a workaround available to those who refinanced their federal loans into private student loans during the pandemic. The U.S. Department of Education plans to issue refunds of up to $20 thousand to people who paid offer their loans after the Covid-forbearance was put in place.

Related:   Can Private Student Loans Be Forgiven?

The federal government will not tax the one-time debt relief thanks to a provision in the American Rescue Plan. But states may tax the amount forgiven. To opt out of the program, borrowers should contact their loan servicer by phone or email.

The future of graduate student loan forgiveness, as part of President Biden’s debt cancellation plan, remains uncertain as the Supreme Court will hear the case later this month with a ruling expected before the payment pause ends this summer.

Stay informed by visiting the Federal Student Aid website,  StudentAid.gov , for the latest information.

FFEL borrowers are locked out of the loan cancellation

When the Biden administration first unveiled its plan for student loan debt relief, the hope was that even those with privately-held loans could participate. At first, consolidating these loans into a Direct Consolidation Loan was a solution.

But as legal challenges mounted, the White House was forced to close that door. The goal was to ensure the relief program would remain intact for the millions of other borrowers whose loans were already eligible for relief without the need for consolidation.

As a result, those with Federal Perkins Loans or Federal Family Education Loan programs held by private lenders and guaranty agencies are now out of luck — even if the Supreme Court gives the green light for the plan.

Despite this setback, there is still a silver lining for those with privately-held FFEL loans.

Related:   Are FFEL Consolidation Loans Eligible for Forgiveness?

Other debt forgiveness opportunities

For FFEL borrowers left out of the president’s student loan forgiveness plan, there’s still hope for removing the burden of grad school loans. Through different programs offered by the Department of Education, those with graduate school debt can find relief.

The Public Service Loan Forgiveness Program offers a way for borrowers to have their Direct Loans forgiven tax-free by simply working full-time for a government or nonprofit organization and making 120 qualifying payments under an income-driven repayment plan.

And for those who don’t meet the PSLF eligibility requirements, there’s still a path to forgiveness through income-driven repayment plans. By making student loan payments for 25 years, a borrower can have their remaining loan balance wiped clean.

Related:   How Income-Driven Repayment Plan Forgiveness Works

But you might not need to wait two decades for forgiveness. The Department of Education has plans to fast-track this timeline. The department is reviewing borrowers’ accounts to give them retroactive credit towards IDR forgiveness for monthly payments made under different repayment plans and time spent in long forbearances and some deferments.

Related:   When Will the IDR Adjustments Be Made

Will graduate student loans be forgiven if I teach in a low-income school?

Yes, your graduate student loans may be forgiven if you teach in a low-income school. The Department of Education has two loan forgiveness programs for educators, the PSLF program and the Teacher Loan Forgiveness program .

PSLF offers more substantial relief by forgiving the entire loan balance of eligible borrowers, while the Teacher Loan Forgiveness program provides less than $20 thousand in loan forgiveness.

Keep in mind that you cannot qualify for both programs simultaneously. So if you have a higher loan balance, consider applying for the PSLF program for maximum relief.

More relief under the new IDR plan

The  new income-driven repayment plan  being rolled out by the Education Department, possibly later this year, offers a mix of good news and bad news for graduate loan borrowers. They won’t see the reduction in monthly payments from 10% to 5% of discretionary income like those with undergraduate loans. Instead, they’ll be subject to a weighted average rate between 5% and 10%.

But the increased income threshold before payments are required could be a significant win for graduate loan borrowers.

The threshold will increase from 150% of the federal poverty level to 225%, providing relief for lower and middle-income borrowers. It’s a testament to the Biden administration’s commitment to easing the burden of student loan debt for all Americans.

Bottom Line

Grad loans qualify for federal student loan forgiveness under the president’s plan. But with the relief tied up in the courts, borrowers with loans from graduate school should explore other opportunities to get rid of their debt.

UP NEXT: Student Loan Forgiveness for College Professors

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• Student Loans

Biden Student Loan Forgiveness FAQs: The Details, Explained

Updated: May 6, 2024, 4:56am

Student loan borrowers can now apply for the Biden administration’s new income-driven repayment (IDR) plan online. The Department of Education has launched a beta website for its Saving on Valuable Education (SAVE) plan.

SAVE is expected to significantly reduce the monthly payments of many low- and middle-income borrowers and provide a shorter path to loan forgiveness.

SAVE will be rolled out in stages, and all program features won’t be active until 2024. But the application for SAVE is now open, allowing the Department of Education to refine its processes before the program’s official launch.

When applying, you will be able to select the option for your loan servicer to place you on the plan with the lowest monthly payment, which will usually be SAVE, according to the website.

“If you submit an IDR application now, it will be processed and will not need to be resubmitted,” the department said on its website. “The application may be available on and off during this beta testing period. If the application is not available, try again later.”

If you apply this summer, your application will be processed in time for your first due date when payments resume this fall, according to the site.

President Joe Biden’s Student Loan Forgiveness Update

What happened to biden’s student loan forgiveness program.

The beta site is being unveiled about a month after the Supreme Court rejected President Joe Biden’s one-time $441 billion debt relief program.

Under that initiative, borrowers who earned less than $125,000 ($250,000 for married couples) would have been able to qualify for forgiveness of up to $10,000 of outstanding federal loans. Borrowers who received Pell Grants to pay for part of their education could have been eligible for up to $20,000 of loan forgiveness.

Following the Supreme Court ruling, the Department of Education is prohibited from forgiving any federal loans under this program.

Who qualifies for student loan forgiveness?

After the Supreme Court struck down the forgiveness plan, the Biden administration set up a Student Loan Relief Committee to engage in “negotiated rule-making” over the next few months to discuss the next steps for student debt relief. It’s unclear if any new forgiveness program would have the same eligibility requirements as the first one, but the administration has indicated that it will prioritize relief for borrowers with financial hardship.

Although Biden’s student loan forgiveness plan isn’t available anymore, you might still qualify for loan forgiveness if any of the following apply:

• You work full-time in public service for 10 years and make 120 qualifying payments on your federal student loans.
• You’re a teacher in a low-income school or at an educational service agency for five consecutive years.
• You’re a nurse or nurse faculty member serving a high-need population in a critical shortage area.
• You qualify for Perkins loan cancellation.
• You’ve experienced a total and permanent disability.
• You have another qualifying reason for student loan discharge, such as being defrauded by your school.
• You make payments for 20 or 25 years on an IDR plan.

How do I apply for student loan forgiveness?

The application process for student loan forgiveness will depend on the program you pursue. Here are some steps you might take, depending on the program:

• Public Service Loan Forgiveness (PSLF). To apply for PSLF, use the PSLF Help Tool to generate and submit the PSLF & Temporary Expanded PSLF (TEPSLF) certification and application to your loan servicer. Submit this form annually so your servicer has a record of your progress. When the 10 years are up, you’ll submit a final PSLF form to federal student loan servicer MOHELA.
• Teacher Loan Forgiveness. Submit this Teacher Loan Forgiveness Application to your loan servicer(s). You’ll need the chief administrative officer of your school or agency to complete the certification section of this application.
• Nurse CORPS Loan Forgiveness. You can apply through your account on the Health Resources & Services Administration’s (HRSA) site. This guide explains the process in greater detail.
• IDR plan forgiveness. Your loans should automatically qualify for forgiveness after you’ve spent 20 or 25 years in repayment. Reach out to your loan servicer about any steps you may need to take.
• Total and permanent disability (TPD) discharge. Borrowers with a total and permanent disability may get an automatic discharge of their student loans. If you don’t, you can complete a TPD discharge application and submit it to the servicer. Along with your application, you’ll need to provide supporting documentation from the U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA) or an authorized medical professional.

What will happen to my student loans?

Without the debt forgiveness program as an option, federal loan borrowers will need to make plans for repayment. The federal payment freeze—which has been in effect since March 2020—ends in September, and borrowers must start making payments in October.

When do student loan payments resume?

Interest begins accruing on loan balances on September 1, 2023, and payments will resume in October .

Can I defer my student loan payments beyond October?

You may qualify for a federal loan deferment and pause your payments depending on your circumstances. Common types of forbearance or deferment include:

• Cancer treatment deferment. If you’re diagnosed with cancer and undergoing treatments, you can submit a request to postpone your payments during your treatments and for six months after your treatment ends.
• Economic hardship deferment. If you receive government benefits, such as welfare, work full-time but earn 150% of the federal poverty guidelines or less, or are serving in the Peace Corps, you may be eligible for economic hardship deferment. You can postpone your payments for several months at a time, up to a maximum of three years.
• In-school deferment. If you’re a borrower looking to return to school to earn another degree, such as a master’s or doctorate, you can defer payments while in school and for up to six months after you graduate or drop below half-time status.
• Unemployment deferment. If you lost your job and are receiving unemployment benefits, you may be able to postpone your payments for up to three years under the unemployment deferment program.

Are there other student loan forgiveness programs?

Even though the Supreme Court blocked the one-time debt relief program, borrowers may qualify for other loan forgiveness programs , including:

• Public Service Loan Forgiveness (PSLF). Federal loan borrowers can qualify for loan forgiveness if they work for a qualifying public service employer, including 501(c)(3) not-for-profits and government agencies. They must work for a qualifying employer full-time for 10 years and make 120 payments under a qualifying payment plan. For borrowers pursuing PSLF , MOHELA is their loan servicer. Any existing loans will be transferred to MOHELA when the borrower notifies their current servicer of their intentions to apply for PSLF.
• Teacher Loan Forgiveness. Teacher Loan Forgiveness provides up to $17,500 in loan forgiveness to teachers who work for five full and consecutive academic years in a low-income school or education agency and teach high-need subjects.
• Income-driven repayment (IDR) discharge. Under an IDR plan , you get a reduced payment based on your discretionary income and a new loan term of 20 or 25 years. The government forgives the remaining amount if you still have a loan balance at the end of your loan term.

How do I know if my student loans are forgiven?

If you qualify for loan forgiveness under PSLF, Teacher Loan Forgiveness or IDR discharge, the loan servicer or Department of Education will send you a notification letter. Depending on your account settings, you may receive the letter electronically or via mail. It will state the amount of forgiveness you received and the date the loans were discharged.

If you made payments beyond the forgiven balance, you’ll receive a refund of the excess amount.

How is student loan forgiveness taxed?

Student loan forgiveness isn’t taxable at the federal level through 2025, due to the American Rescue Plan Act. After that, how loan forgiveness is taxed varies by program:

• PSLF. Loans forgiven under PSLF are not taxable as income.
• Teacher Loan Forgiveness. Previously, the loan balance forgiven through Teacher Loan Forgiveness was taxable as income. However, loans forgiven on or after January 1, 2021 are exempt from federal income taxes.
• IDR discharge. The loan balance forgiven under IDR plans is subject to federal income taxes.

SAVE Repayment Plan FAQs

What is the save plan.

The SAVE plan is a new IDR plan. While the other IDR plans calculate your payments using your discretionary income—defined as the difference between your income and 150% of the federal poverty guideline for your household size—the SAVE plan uses a different formula. It considers your discretionary income to be the difference between your income and 225% of the federal poverty guideline, so more of your income is protected.

In 2024, additional benefits will be in force. Those features include loan forgiveness after just 10 years for those with loan balances of $12,000 or less.

The SAVE plan will replace the current Revised Pay As You Earn (REPAYE) Plan. If you’re already on the REPAYE Plan you will automatically be enrolled in SAVE.

How does the SAVE plan work?

SAVE slashes payments for borrowers enrolled in IDR plans because it uses a higher percentage of the federal poverty guideline to determine your discretionary income.

Let’s say you’re single and earn $30,000 annually. Under the current IDR plans, your discretionary income would be the difference between your $30,000 salary and 150% of the federal poverty guideline for one person. As of 2023, the guideline for one person is $14,580; 150% of that number is $21,870.

For the existing IDR plans, your discretionary income would be $8,130. Depending on the plan, your payments would be up to 10% to 20% of your discretionary income, so you’d pay $813 to $1,626 per year.

Under the SAVE plan, for example, single borrowers who earn $32,800 or less—or families of four who earn $67,500 or less (amounts are higher in Alaska and Hawaii)—will qualify for $0 payments. For borrowers transferring to SAVE from another plan, the new plan would help them save thousands each year.

Who qualifies for the SAVE repayment plan?

Any borrower who owes eligible federal student loans can qualify for the SAVE repayment plan. Eligible loans include:

• Direct subsidized and unsubsidized loans
• Direct PLUS loans made to graduate or professional students
• Direct consolidation loans that didn’t repay any parent PLUS loans

The following loan types are also eligible for SAVE if you consolidate them with a direct consolidation loan:

• Subsidized and unsubsidized FFEL loans
• FFEL Plus loans made to graduate or professional students
• FFEL consolidation loans
• Perkins loans

If you were previously on the Revised Pay As You Earn (REPAYE) plan, you’ll automatically be enrolled in SAVE. If not, you can apply for SAVE by submitting an IDR plan request on the Federal Student Aid website.

What are the pros and cons of the SAVE repayment plan?

Some benefits include:

• Larger income exemption. When calculating discretionary income, the SAVE plan uses 225% of the poverty guideline for your state and family size. By contrast, the other plans use 100% or 150%. This exemption means lower monthly payments.
• More generous interest subsidy. On the SAVE plan, the government will pay for any remaining interest charges that your monthly payments don’t cover.
• Payments as low as 5% of discretionary income. Starting in 2024, payments on undergraduate federal student loans will be cut in half to 5%, rather than 10%, of your discretionary income.
• Faster path to loan forgiveness. If your original balance was $12,000 or less, you could receive loan forgiveness after 10 years. One year gets added for each additional $1,000 you borrowed, up to a maximum of 20 or 25 years.
• Spouse’s income can be excluded. If you file taxes separately from your spouse, the Department of Education won’t include their income when calculating your monthly payment on the SAVE plan.

At the same time, there are a few potential cons to this plan:

• Parent loans aren’t eligible. Parent loans aren’t eligible for the SAVE plan, nor are consolidation loans that paid off any loans made to parents.
• Some benefits won’t be active until July 2024. Although the SAVE plan is currently active, not all of its features are available yet. In particular, you’ll have to wait until July 2024 for undergraduate loan payments to be reduced to 5% and for the forgiveness timeline to be shortened to 10 or more years.
• May not benefit from grad school loans. Borrowers with graduate student loans will still have to pay 10% of their discretionary income each month, which is the same percentage as some other IDR plans. That said, grad borrowers may still see a lower payment on SAVE due to the way it calculates discretionary income.

Is the SAVE Plan the same as student loan forgiveness?

SAVE does not provide immediate loan forgiveness. It’s a new repayment plan that could give borrowers a lower monthly payment. Eligible borrowers could qualify for loan forgiveness sooner and SAVE will discharge loans in as little as 10 years rather than 20 or 25.

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For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans, and she holds certifications in student loan and financial education counseling.