Ibrahim Gardner
Student loan forgiveness has been a topic of discussion for years, with many Americans struggling under the weight of their federal student loans. President Biden has proposed canceling federal student loans, which has sparked a debate about who will ultimately bear the cost of such a decision. Some argue that those benefiting from loan forgiveness should not be burdened with the cost, suggesting increased taxes on corporations and high earners as a potential solution. Others express concerns about the impact of large amounts of national debt on the economy, including heightened vulnerability to rising interest rates and increased inflation. As of 2025, approximately 29% of borrowers are enrolled in income-driven repayment plans, which offer more affordable monthly payments. The previous standard repayment plan, requiring fixed monthly payments over 10 years, has been replaced by a tiered schedule based on loan balances. While the debate continues, it remains unclear who will pay for student loan relief, with potential consequences for the global financial system.
| Characteristics | Values |
|---|---|
| Who is considering student loan relief? | President Biden |
| Who will benefit from student loan relief? | Lower- and middle-class Americans |
| Who will pay for student loan relief? | Corporations, high earners, and the wealthy |
| How much debt will be canceled? | $20,000 |
| How many people have outstanding federal student loans? | 42.5 million |
| How many borrowers are enrolled in an IDR plan? | 12.3 million (29%) |
| What is the benefit of an IDR plan? | More affordable monthly payments |
| What is PSLF? | Public Service Loan Forgiveness |
| Who is eligible for PSLF? | Qualifying federal student loans after 120 qualifying payments (10 years) while working for a qualifying public service employer |
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What You'll Learn
Income-driven repayment plans
Income-driven repayment (IDR) plans are a popular option for student loan relief in the United States. As of 2025, about 29% of federal student loan borrowers, or approximately 12.3 million people, are enrolled in an IDR plan. These plans offer more affordable monthly payments by tying them to the borrower's income and loan balance.
The IDR plans available include the Income-Based Repayment Plan, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) Plan. The Income-Based Repayment Plan is recommended by the U.S. Department of Education for borrowers in the SAVE Plan to transition to a legally compliant repayment plan. The PAYE and ICR plans are also options for borrowers seeking income-driven repayment options.
President Trump's One Big Beautiful Bill (OBBB) introduced significant changes to federal student loan repayment options. One notable change is the introduction of a tiered repayment schedule based on borrowers' loan balances, offering lower monthly payments over a longer period for larger balances. The OBBB also created the Repayment Assistance Plan (RAP), which bases payments on the borrower's income minus $50 for each dependent.
Borrowers can benefit from quick and easy IDR plan applications by providing consent for the Department of Education to obtain their federal tax information directly from the IRS. This automatic income verification process eliminates the need for manual uploads and ensures annual recertification of IDR plans. Additionally, borrowers in the SAVE Plan are encouraged to use the Loan Simulator to compare available repayment plans, determine eligibility, and identify the best option for their repayment goals.
It is important to note that Parent PLUS Loan borrowers may have limited alternative payment plan options. Existing Parent PLUS Loan borrowers who consolidate their debt by July 1, 2026, and enrol in an IDR plan can maintain access to alternative payment plans. However, those who do not consolidate their loans by the specified deadline will only have access to the standard plan.
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PSLF forgiveness after 120 payments
The Public Service Loan Forgiveness (PSLF) program is a federal initiative that allows borrowers to have their remaining student loan balance forgiven after making 120 monthly payments over 10 years. These payments must be made in full, on time, and while working full-time for a qualifying employer, typically a government or nonprofit organization. The program is designed to encourage individuals to pursue careers in public service, which are often lower-paying, such as teaching, nursing, and public interest law.
To apply for PSLF, borrowers must submit an employment certification form for each qualifying employer during the 120 payments. While there is no requirement to submit these forms regularly, doing so can simplify the process. The Education Department will notify borrowers upon receiving their application and supporting documents. Importantly, borrowers are not obligated to make loan payments while their application is being processed.
The PSLF program has undergone temporary adjustments to accommodate the challenges posed by the COVID-19 pandemic. The Education Department has included months spent under the pandemic payment pause, from March 2020 through September 2023, as qualifying payments, provided the borrower was also working for a qualifying employer during that time. Additionally, the department has relaxed rules regarding eligible repayment plans, now accepting payments made under any plan as long as the borrower was working in a PSLF-qualifying role.
The PSLF program has provided significant relief to borrowers, with the Biden administration forgiving $78.46 billion in student loans for over one million borrowers as of January 14, 2025. This averages out to approximately $73,400 in debt forgiveness per borrower. However, some borrowers have expressed frustration with the time it takes to receive discharge approval, with reports of expected dates being pushed back multiple times.
Regarding the financing of student loan forgiveness, there has been debate about the potential economic implications and the question of who should bear the cost. Critics argue that large amounts of national debt can make the economy vulnerable to rising interest rates and increased inflation. However, proponents of student loan cancellation suggest that the beneficiaries of a more educated workforce, such as corporations and high earners, should contribute more to offset the cost. President Biden has considered cancelling federal student loans, with estimates suggesting it could increase the inflation rate by 0.15% to 0.27% over a year.
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Biden's plan to cancel federal student loans
President Joe Biden has overseen the cancellation of student loans for more than 5 million Americans, which is more than any other president in US history. Biden's plan to cancel federal student loans has been met with opposition from Republicans, who argue that the cost of loan forgiveness will ultimately be passed on to taxpayers.
Despite this, the Biden-Harris Administration has approved nearly $138 billion in student debt cancellation for almost 3.9 million borrowers through over two dozen executive actions. The SAVE (Saving on a Valuable Education) repayment plan provides debt forgiveness to borrowers who have been repaying for at least 10 years and took out $12,000 or less in federal loans. For borrowers enrolled in SAVE, monthly payments are based on income and family size, rather than loan balance, ensuring that balances do not grow due to unpaid interest. Additionally, starting in July, undergraduate loan payments will be halved, with a borrower's loan payment capped at 5% of their discretionary income.
The Biden Administration has also expanded eligibility for loan forgiveness programs without going through Congress. One such program is borrower defense, which allows students to get their loans canceled if they were cheated or misled by their colleges. Another program provides loan forgiveness for borrowers with disabilities, and Public Service Loan Forgiveness offers to erase all remaining debt for borrowers in government or nonprofit jobs who have made 10 years of monthly payments.
While Biden's plan provides much-needed relief for student loan borrowers, concerns have been raised about the potential negative effects on the economy, including increased vulnerability to rising interest rates and inflation. However, supporters of student loan cancellation argue that increasing taxes on corporations, high earners, and the wealthy could offset the cost and that the government has run on a deficit every year since 2001 without significant adverse effects.
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Trump's One Big Beautiful Bill
On the 4th of July, President Trump signed the One Big Beautiful Bill (OBBB) into law, which will significantly alter how federal student loans are repaid in the coming years. The Act includes a new income-based Repayment Assistance Plan (RAP) that will be available to borrowers by the 1st of July 2026.
The OBBB introduces new limits on how much borrowers can borrow in federal student loans and makes changes to both current and future borrowers' repayment options. The bill ends the Grad PLUS loan program, which previously allowed students to borrow up to the full cost of attendance. It also adds new limits on how much students and parents can borrow in federal student loans, with limited exceptions for students who have already borrowed and are currently enrolled.
The new RAP plan is designed to replace older plans that allowed borrowers to repay based on their specific income and eventually gain student loan forgiveness. Under the new regulations, three other income-driven repayment (IDR) plans: Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) are being phased out by 2028. As a result, borrowers who consolidate their student loans through the federal direct loan program after the 1st of July 2026 will have to choose between the RAP and the standard plan.
The RAP plan has a longer repayment period of 30 years before borrowers can qualify for student loan forgiveness, unlike older plans which allowed for this after 20 or 25 years. It also bases a borrower's payment on their gross income, rather than their discretionary income. This means that even those earning far below the poverty level will be required to make minimum payments of at least $10 a month. However, the RAP plan, like the SAVE plan, will waive any interest not covered by the borrower's monthly payment.
The Trump Administration has stated that the OBBB will support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers. They have criticised the previous Biden Administration for using "so-called 'loan forgiveness' promises" to win votes, arguing that these actions were unlawful and that the new plan will "support struggling borrowers" by removing negative amortization of interest.
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Student loan forgiveness scams
- Be cautious of unsolicited contacts: If you receive a phone call, email, or letter out of the blue claiming that you are eligible for student loan forgiveness, treat it with caution. Scammers sometimes use personal information, such as your loan balance, to appear legitimate.
- Watch out for promises of quick relief: Be wary of anyone promising immediate or fast student loan forgiveness or claiming they can quickly fix a default. Legitimate processes take time and usually involve working with your loan servicer.
- Never share your Federal Student Aid login or PIN: The U.S. Department of Education or your federal student loan servicer will never ask for this information via phone or email. Protecting your login credentials is crucial to safeguarding your personal information.
- Be aware of official-sounding names: Scammers often use names containing terms like "federal" or "national" to sound authentic. They may even use official seals and logos. Always verify the sender's email address and be cautious of unusual capitalization, improper grammar, or incomplete sentences.
- Know that you don't need to pay for loan forgiveness assistance: Federal student loan servicers cannot charge you fees for applying for loan forgiveness, income-driven repayment plans, or consolidating your loans. If a company demands upfront payment for these services, it is likely a scam.
- Verify the legitimacy of debt relief companies: While seeking help from a private debt relief company doesn't always lead to a scam, it's important to be cautious. Ensure the company is trustworthy and affiliated with the U.S. Department of Education. You can review the list of contracted federal student loan servicers before engaging with any company.
- Contact your loan servicer: If you're unsure about a message or offer, contact your federal loan servicer directly. They can help you explore legitimate options for loan repayment or forgiveness. Additionally, they can verify whether any unauthorized actions have been taken on your loans.
- Report scams and suspicious activity: If you encounter a scam or suspect fraudulent activity, take action by contacting your local Better Business Bureau® and filing complaints with relevant government agencies, such as the Consumer Financial Protection Bureau or the Federal Trade Commission.
While there are legitimate student loan forgiveness programs and resources available, it's essential to be vigilant and informed to protect yourself from scams. Always remember that if something seems too good to be true, it probably is.
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Frequently asked questions
President Joe Biden announced a plan to cancel up to $20,000 in federal student loan debt for lower- and middle-class Americans. The plan will be paid for by taxpayers, but some argue that the burden should fall on corporations, high earners, and the wealthy, who have benefited from an educated workforce.
PSLF stands for Public Service Loan Forgiveness. It allows qualifying federal student loans to be forgiven after 120 qualifying payments (10 years) while working for a qualifying public service employer, such as the government, military, or certain non-profit organizations.
IDR stands for Income-Driven Repayment plan. These plans cap monthly payments based on income and family size and can result in a $0 monthly payment for those with low incomes. The remaining balance on loans may be forgiven after 20 or 25 years of repayment.
The old standard plan required fixed monthly payments over 10 years, whereas the new plan offers lower monthly payments over a longer period for larger balances.
There are concerns about the negative effects of large amounts of national debt, such as increased vulnerability to rising interest rates and inflation. However, others argue that the US government has run on a deficit for years without significant adverse effects, and student loan cancellation is unlikely to have a substantial impact.
