Navient, one of the largest student loan servicers, will cancel $1.7 billion in private student loans to settle fees it gave to borrowers who couldn’t afford to repay them.
Although the settlement only affects a small percentage of borrowers, a larger group of borrowers may also be eligible to have some of their loans forgiven.
The Federal Public Service Loan Forgiveness Program (PSLF), which typically allows public service workers to qualify for forgiveness after 120 loan repayments, has become more accessible.
After being criticized for understating eligible payments, the Department for Education has introduced a temporary waiver that makes partial payments and late payments count towards the discount.
Additionally, if borrowers consolidate their Federal Family Education Loans (FFELs) (government-guaranteed loans issued by private lenders prior to 2010, when the program ended) into the government’s direct lending program, previous FFEL payments will also count for cancellation, provided the borrower was in full-time government employment at the time of the payments.
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Meanwhile, the nearly two-year suspension of federal student loan payments — which is set to end May 1 — could allow borrowers in the PSLF program, as well as borrowers in an income-driven repayment plan, to d have part of their loans forgiven.
While payments on federal student loans have been suspended since March 2020, PSLF borrowers have been credited as if they had made payments during this time. This could add 26 months to the payment requirement for PSLF applicants.
Similarly, the months where payments were suspended will count towards the 20-25 years of payments (depending on the plan) required for borrowers on the Income-Based Repayment Plan to qualify for loan forgiveness. This should also have the effect of reducing the total amount they repay over the term of their loans.
Although blanket loan cancellation seems unlikely in the current political climate, there may be targeted relief for different groups, such as teachers or healthcare workers, as well as parent borrowers who may collapse under heavy debt, says Andrew Pentis, a Certified Student Loan. advisor at Student Loan Hero, at Lending Tree.
Borrowers facing bankruptcy or who are bankrupt may also be candidates for reorganization.
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