The weight of student loan debt in the United States has reached a staggering $1.7 trillion, impacting millions of borrowers. This financial burden can hinder homeownership, career choices, and economic security. The question of canceling student loans entirely has become a central debate in American politics and personal finance. While complete cancellation isn’t currently possible through a single program, there are avenues for forgiveness, discharge, and strategic repayment that can significantly ease the burden.

How Many Student Loans Were Canceled?

Total cancellation of federal student loans is rare. However, there are specific situations where it can happen. Loan discharge can occur due to school closure, complete disability, or death of the borrower. Public Service Loan Forgiveness (PSLF) is a program that forgives the remaining balance of federal student loans after ten years of working full-time in public service. As of April 2024, only about a quarter of a million borrowers have successfully achieved PSLF forgiveness, highlighting the program’s complexity and limitations.

The Department of Education proposes automatic debt cancellation for borrowers who qualify for existing forgiveness programs like PSLF or Income-Driven Repayment (IDR) forgiveness but have yet to apply. This initiative aims to streamline the process and benefit millions.

Is There Legal Action to Get Loans Revoked?

Loan cancellation through legal action is not common but possible. Borrowers can file a borrower defense to repayment claim if they believe their school misled them or engaged in misconduct. If successful, the borrower may have their loans discharged. However, the process can be lengthy and complex, requiring significant evidence.

Another potentially more widespread legal avenue involves lawsuits against for-profit colleges accused of predatory lending practices. If a court finds the college engaged in wrongdoing, student loans tied to that institution could be discharged for affected borrowers.

What is the Save Plan?

The Income-Driven Repayment (IDR) plan offers a path to eventual loan forgiveness after a set period of qualified payments. The standard IDR plan forgives any remaining balance after 25 years of on-time payments. However, the Biden administration has proposed a change called the SAVE plan, which would shorten the forgiveness timeline to 20 years for undergraduate loans and 25 years for graduate school debt. This change would significantly benefit millions of borrowers struggling with their loan burden.

The SAVE plan still needs to be finalized and requires approval. However, it highlights the ongoing efforts to make IDR a more viable option for loan forgiveness.

Alternatives to Cancellation: Forgiveness and Strategic Repayment

While complete cancellation may not be readily available, other strategies exist to manage and eliminate student loan debt.

• Public Service Loan Forgiveness (PSLF): Working full-time for a qualifying government or non-profit organization for ten years and making 120 on-time monthly payments can lead to complete loan forgiveness under PSLF. However, navigating the program’s requirements can be challenging.
• Teacher Loan Forgiveness: Teachers who work in low-income schools for five consecutive years can qualify for up to $17,500 in federal student loan forgiveness.
• Income-Driven Repayment (IDR) Plans: IDR plans adjust monthly payments based on your income and family size, making repayment more manageable. After 20 or 25 years of qualified payments under the proposed SAVE plan, any remaining balance would be forgiven.
• Loan Consolidation: Consolidating multiple loans into one can simplify repayment and potentially qualify you for a lower interest rate.
• Refinancing: Depending on your creditworthiness, refinancing private student loans with a private lender may offer a lower interest rate and potentially save you money over the loan term.

Conclusion

While complete student loan cancellation isn’t a one-size-fits-all solution, there are various options. Forgiveness programs like PSLF and IDR offer a path to eventual debt elimination for federal loans. Strategic repayment strategies like consolidation and refinancing can also significantly reduce the financial burden. The ongoing debate and proposed changes like the SAVE plan indicate a potential shift towards making loan forgiveness more accessible.

For borrowers struggling with student loan debt, staying informed about available programs and exploring all options to manage their debt effectively is crucial. Resources from the Department of Education and financial aid offices can provide valuable guidance.