Overall, the COVID-19 pandemic has positively impacted student loan forgiveness in the US to help borrowers who have fallen on hard times.
Few borrowers have had to pay monthly payments on their federal student loans between March 2020 and January 2022. Yet, those 22 months will all count towards income-driven repayment forgiveness or the Public Service Loan Forgiveness program.
I’m a student loan lawyer. Below, I’ll give my expert advice on how the coronavirus pandemic impacted student loan forgiveness and how to prepare for the COVID payment suspension to end.
What are the requirements to be eligible for student loan forgiveness? Eligibility for student loan forgiveness requirements are based on what kind of forgiveness you want:
- Income-Driven Repayment Forgiveness: Enroll in an IDR plan, make 20-25 years’ worth of payments, and any remaining loan balance is forgiven at the end of your repayment plan.
- Teacher Loan Forgiveness: Teach full-time for 5 consecutive years in a low-income school to get up to $17,500 of forgiveness. This applies to both Direct Loans and FFEL (Federal Family Education Loans).
- Public Service Loan Forgiveness (PSLF): You need to make 120 on-time monthly payments while working full-time at a qualifying non-profit. Remember, Parent Plus loans are only eligible if parent borrowers work in public service.
Check out my guide on the new PSLF Limited Opportunity Waiver, which is the new (temporary) way the government is trying to help borrowers qualify more payments towards PSLF.
Disclaimer: I am a student loan lawyer, but this post contains general information and should not be taken as legal advice. If you want legal advice that pertains to your specific situation, you should schedule a free consultation with me.
Emergency relief for student loan borrowers
From March 2020 through January 2022, most federal student loan borrowers have not had to make payments on their student loans. Most federal student loans have had a 0% interest rate while student loan repayment is paused, meaning interest has not accrued during this time.
These COVID forbearance months all count towards student loan forgiveness.
The Education Department may also provide student loan relief to borrowers who miss a payment during the first 90 days after student loan payments resume in 2022. This would be good news for your credit score!
Throughout the COVID payment pause, President Joe Biden’s Education Department has provided student loan forgiveness due to predatory practices by for-profit colleges.
How to prepare for your loan payments to start again
As February 2022 approaches, you need to prepare for your loan payments to restart sometime in March.
First, re-enroll in auto-pay. Make sure your auto-pay is set up now, so you don’t have to worry about it later.
Request deferment for unemployment or other legitimate reasons. Many Americans are still facing tough times. If you seriously can’t start paying in February/March 2022, request an economic hardship deferment.
Enroll in an income-driven plan (IDR) if you haven’t already done so. If it makes sense for your budget, enroll in any of the 4 IDR plans:
- Income-based repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-contingent repayment (ICR)
A note on income-driven repayment: The government is considering a simplified IDR plan to replace the existing plans. While it’s unclear what that will be, exactly, this may change the way you certify your income and other details, as well as the way your payment is calculated.
If you've moved to a new address or changed phones, make sure your servicer has your current contact information.
Consider consolidating your loans so you aren’t worrying about multiple monthly payments for various loans. (Refinancing is not consolidating.)
However, remember that if you consolidate your student loans, your progress towards loan forgiveness resets to zero. The only exception is with the new PSLF waiver, which allows you to get credit for back payments even after consolidation (more on that waiver below).
Changes to income-driven repayment plans
Not much is changing with income-driven repayment options.
However, one significant change in IDR has to do with income recertification. The U.S. Department of Education may allow borrowers like you to recertify your income and family size over the phone instead of via online application. This could make the recertification process easier and quicker.
Potential changes for borrowers in student loan default
There’s no confirmation yet, but the Biden administration might automatically move more than 7 million student loan borrowers who are currently in default out of that default status.
Senator Elizabeth Warren has warned that many student loan borrowers will fall into delinquency then default once the COVID forbearance period ends. The Education Department is considering “Operation Fresh Start” to automatically remove borrowers from default status.
Removal from default status will shield defaulted borrowers from wage garnishment, tax refund offset, and social security garnishment. If your loan is in default, the government can even garnish money from your monthly advance child tax credit payments.
New PSLF guidelines, including the updated waiver
For October 2021 through October 2022, the federal government is offering a Limited Opportunity Waiver. This new waiver can help borrowers get credit towards PSLF for payments that were previously deemed ineligible.
A lot of borrowers believed they were complying with PSLF but weren’t. (Student loan servicers have been accused of misleading borrowers.) The Limited Opportunity Waiver is meant to help you count as many payments as possible towards PSLF.
Also, I can’t say this enough: All months during COVID forbearance count towards PSLF — even if you didn’t pay during those months.
Unfortunately, in-school deferment during COVID doesn’t count towards PSLF. This means that if you were enrolled in school between March 2020 and January 2022, you might not get loan forgiveness credit for the COVID forbearance months.
However, if you went back to school during the COVID forbearance period, there may be hope. Some borrowers have asked their loan servicer to retroactively deny the automatic in-school deferment on loans they received before they went back to school. That would likely qualify those months of non-payment towards PSLF.
Private loans and COVID-19 emergency relief
Private student loan providers were not required to offer any COVID-related relief. However, many private loan providers have tried to support borrowers.
Many servicers offer economic hardship deferment — although interest will usually continue to accrue during private loan deferment.
Some lenders, like Discover or Navient, offer temporary lower interest rates.
However, no lender offers private student loan forgiveness outside of disability or death.
Tax-free employer loan contributions
Employers may help borrowers pay off student loans. Technically, this is not “forgiveness,” but it feels like a form of forgiveness to the fortunate borrowers whose employers choose to assist.
Congress’s March 2021 CARES Act created a temporary tax-free provision for employer student loan assistance programs.
An American employer may make up to $5,250/year in student loan payments for its employee. The federal government does not require the employer to pay taxes on these payments. The employer also gets a payroll tax exclusion on the yearly payment amount.
Talk to your employer about tax-free student loan contributions.
Refunds for payments during the pandemic
You can ask for a refund of any payments made on federal student loans between March 2020 and January 2022.
Although every eligible borrower was automatically placed into 0%-interest COVID forbearance, some borrowers opted to continue making payments. Reasons vary — maybe they didn’t understand that there was 0% interest, or they overestimated their savings.
Whatever the reason, you can ask your loan provider for a refund. If you have loans with multiple providers, you need to contact each provider separately. Asking for a refund should not impact loan forgiveness. A refund should not disqualify those months from counting towards PSLF or income-driven forgiveness.
Don’t miss out on the benefits for your student loans.
I’m a student loan attorney with years of experience helping borrowers like you with student loan forgiveness, student loan settlements, and navigating student debt, especially during COVID.