Navient, one of the largest student loan service providers, will cancel $1.7 billion in private student loans to pay for the costs it has provided to borrowers who could not afford to pay them back.
While the settlement affects only a small percentage of borrowers, a larger group of borrowers may also be eligible for a portion of their loans forgiven.
The Federal Public Service Loan Forgiveness Program (PSLF), which typically qualifies public service employees for forgiveness after 120 loan payments, has become more accessible.
After criticizing the undercounting of eligible payments, the Department of Education introduced a temporary waiver that allows partial payments and late payments to count toward forgiveness.
In addition, if borrowers consolidate their Family Federal Education Loan (FFEL) loans (government-guaranteed loans made prior to 2010, when the program ended) by private lenders into the government’s direct lending program, past FFEL payments count toward forgiveness, provided the borrower was working full-time in a public service job at the time of the payments.
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Borrowers whose loans are not yet included in the direct loan program must consolidate their loans into the direct loan program by October to qualify for this waiver, says Mark Kantrowitz, author of “Who Graduates From College? Who? not?”
Meanwhile, the nearly two-year suspension of payments on federal student loans — slated for the end of May — could make it easier for borrowers in the PSLF program, as well as borrowers on an income-driven repayment plan, to get some of their loans. to forgive.
While payments on federal student loans have been suspended since March 2020, PSLF borrowers have been credited as if they had made payments during that period. That could add 26 months to the payment obligation for PSLF applicants.
Likewise, the months in which payments were suspended count toward the 20 to 25 years of payments (depending on the plan) that borrowers in the income-driven repayment plan need to qualify for loan forgiveness. That should also have the effect of reducing the total amount they repay over the life of their loans.
While general loan forgiveness may seem unlikely in the current political climate, there could be targeted relief for various groups, such as teachers or health professionals, as well as parental borrowers who may be succumbing to heavy debts, Andrew Pentis, a certified student loan counselor at Student Loan Hero, told me. Lending Tree.
Borrowers facing bankruptcy or in bankruptcy may also qualify for waiver.
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