Got student loans? The Education Department wants to change how you pay them back (2024)

FAQs

How can the Department of education forgive student loans? ›

Income-Driven Repayment (IDR) Forgiveness

If you repay your loans under an IDR plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years—or as few as 10 years under our newest IDR plan, the Saving on a Valuable Education (SAVE) Plan.

“Good debt” includes funding that puts you in a better financial situation in the long run, while “bad debt” leads to credit problems. Student loans are typically considered good debt because a higher education can lead to the career or income you want.

If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability. Also, the government can collect on your loans by taking funds from your wages, tax refunds, and other government payments.

Your student loan servicer(s) will notify you directly after your forgiveness is processed. Make sure to keep your contact information up to date on StudentAid.gov and with your servicer(s). If you haven't yet qualified for forgiveness, you'll be able to see your exact payment counts in the future.

If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief. If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt relief.

Higher education financing allows many Americans from lower- and middle-income backgrounds to invest in education. However, over the past 30 years, college tuition prices have increased faster than median incomes, leaving many Americans with large amounts of student debt that they struggle or are unable to, pay off.

More debt and less support have undeniably led to long-term debt burden and severe financial consequences. Although more students of color are attending college and pursuing the “American Dream,” student debt has delayed them from purchasing homes, starting businesses, and building generational wealth.

Do private student loans go away after seven years? Private student loans don't go away unless you pay them off, but in most cases, they'll fall off your credit report after seven years.

Why is it so hard to pay back student loans? ›

Interest

When you take out student loans, you don't just repay the exact sum you borrowed. For example, if you take out $20,000 in student loans, you're generally going to end up spending well more than $20,000 by the time your student debt is paid off due to accrued interest.

If some of your loans are forgiven, your monthly payment could be lowered if you're on a fixed repayment plan. Most federal student loans are eligible for at least one income-driven repayment (IDR) plan. If your income is low enough, your payment could be as little as $0 per month.

Key findings. The average federal student loan debt held as of the third quarter of 2023 is $37,645. Black Americans hold an average (median) of $26,000 in student loan debt, while white Americans have $25,000. Fifteen percent of Americans with student loans are behind on their payments.

The average federal student loan debt balance is $37,088, while the total average balance (including private loan debt) may be as high as $39,981. Less than 2% of private student loans enter default as of 2021's fourth financial quarter (2021 Q4).

Generally, if you miss payments, your loan is considered delinquent and is reported as such to the national credit reporting agencies. You don't get reported when you're in forbearance. During the on-ramp period (through Sept. 30, 2024), we'll automatically put your loan in a forbearance for the payments you missed.

But the money isn't free. Sure, it's government money, which doesn't seem completely real, but by canceling debt payments the government forgoes future revenue, which adds to annual deficits and the total national debt. Future taxpayers will essentially pay the bill.

Matters concerning student loans and student loan forgiveness are handled by the Office of Federal Student Aid (FSA).

Your loan can be discharged only under specific circ*mstances, such as school closure, a school's false certification of your eligibility to receive a loan, a school's failure to pay a required loan refund, or because of total and permanent disability, bankruptcy, identity theft, or death.

You must be a direct employee of a qualifying employer for your employment to qualify. This means that employees of contracted organizations, that are not themselves a qualifying employer, won't qualify for PSLF including government contractors and for-profit organizations.