• September 28, 2022

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Over the course of the last seven months, the Biden administration has announced a series of initiatives to expand student loan forgiveness under two key existing programs. The Education Department indicates that millions of borrowers will benefit from the new changes.

But several cohorts of borrowers continue to be excluded from new student loan forgiveness expansions. And as President Biden reportedly considers an even broader student loan cancellation initiative, many may be wondering if they will be left out yet again.

Biden Expands Student Loan Forgiveness Under PSLF and IDR

Last October, President Biden announced sweeping changes to the Public Service Loan Forgiveness (PSLF) program, which provides loan forgiveness to borrowers after 10 years of qualifying employment in nonprofit or government work. Dubbed the “Limited PSLF Waiver,” the temporary changes will allow the Department of Education to count periods of repayment that would have been previously rejected under the original PSLF rules, such as payments made under the wrong repayment plan or on the wrong type of federal student loan.

Then in April, the Biden administration announced major reforms to income-driven repayment (IDR) programs, which are plans that tie a borrower’s monthly payments to their income and family size, and lead to eventual loan forgiveness after 20 or 25 years of repayment. The changes to IDR will allow the Education Department to conduct a one-time “adjustment” and count various loan periods — including periods of repayment under any plan, as well as certain periods of deferment and forbearance — towards a borrower’s IDR repayment term.

Taken together, the “IDR Adjustment” (as the Department is calling it) and the Limited PSLF Waiver program will bring millions of borrowers closer to student loan forgiveness. The Department estimates that at least 40,000 PSLF borrowers will see immediate student loan forgiveness as a result of the changes. And under the IDR initiative, “Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan.”

But not all student loan borrowers will benefit from these changes.

FFEL Spousal Consolidation Loans Excluded From Student Loan Forgiveness Under IDR and PSLF Initiatives

A key feature of both the Limited PSLF Waiver and the IDR Adjustment is that loan periods on older, FFEL-program student loans can count, as long as the borrower consolidates the FFEL loan into the federal Direct consolidation loan program before the applicable deadlines (October 31, 2022 for Limited PSLF Waiver, and January 1, 2023 for the IDR Adjustment).

There’s at least one type of FFEL loan that can’t benefit from this, however. Spousal FFEL consolidation loans (also known as joint or marital consolidation loans) previously allowed married borrowers to fuse their separate federal student loans into a single loan with a combined balance. Both spouses would then be jointly responsible for the repayment of the consolidated loan’s entire balance. While this kind of federal student loan is no longer issued (in part because it can become a major problem if the borrowers get divorced), thousands of borrowers are still stuck with these types of loans.

According to the Department of Education, “FFEL Program spousal consolidation loans are not eligible to be consolidated into the Direct Loan Program.” Since FFEL loans must be consolidated into the Direct Loan Program to benefit from the Limited PSLF Waiver and IDR Adjustment, FFEL spousal consolidation loans are effectively excluded from these initiatives.

Non-Consolidated Parent PLUS Loans Excluded From Student Loan Forgiveness Under IDR and PSLF Initiatives

Federal Parent PLUS loans are issued to the parent of an undergraduate student for the benefit of that student. But the student is not responsible for the loan’s repayment — only the parent borrower is. Parent PLUS loans generally have higher interest rates compared to other federal student loans, and they don’t have access to the most beneficial federal loan repayment programs.

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Parent PLUS loans can be eligible for PSLF and IDR, but only if they are consolidated into a federal Direct consolidation loan. And even then, they can only access the Income Contingent Repayment (ICR) plan, which is generally the least affordable IDR option.

The Education Department has made clear that non-consolidated Parent PLUS loans will not qualify for relief under the Limited PSLF Waiver: “Time in repayment on parent PLUS loans is not eligible for credit under the limited PSLF waiver, even if you consolidate them into a new Direct Consolidation Loan by Oct. 31, 2022.” The Education Department has not expressly said that Parent PLUS loans are also excluded from the IDR Adjustment. But since non-consolidated Parent PLUS loans are not eligible for IDR, it is very possible that they would be left out from those benefits, as well.

Parent PLUS loans that were previously consolidated into the Direct loan program could benefit from the PSLF and IDR initiatives, but only for the consolidation loan itself: “If you consolidate (or previously consolidated) a parent PLUS loan, the time in repayment on the consolidation loan may be eligible for credit toward PSLF” under the Limited PSLF Waiver.

Private Student Loans Excluded From Student Loan Forgiveness Under IDR and PSLF Initiatives

Private student loans are ineligible for the Limited PSLF Waiver and IDR Adjustment. The PSLF and IDR programs are available only for federal student loans, and there is no way to convert a purely private student loan into a federal student loan. Federal Direct consolidation loans can only repay other federal student loans, not private loans.

What About Broad Student Loan Cancellation?

Biden administration officials — and the President himself — have repeatedly said that broader student debt cancellation is under serious consideration. No final decision has been made, and a specific timeline has not been announced, although White House officials previously suggested that they would make a determination prior to the end of the ongoing student loan payment pause, which is currently set to expire on August 31, 2022.

Since nothing has been announced yet, it is impossible to know who may be excluded from broad student loan cancellation. Logistically, the easiest way to implement widespread student loan forgiveness on such a massive scale would be to make it universal and automatic. Under such a scenario, presumably any borrowers with federal student loans could benefit (perhaps even Parent PLUS borrowers and FFEL spousal consolidation loan borrowers, although private loans would likely still be excluded).

But the Biden administration is reportedly considering eligibility restrictions, in part to make sure that the benefits of wide-scale student loan cancellation go primarily to lower-income borrowers. These restrictions could be based on the borrower’s income, the borrower’s degree program, or the type of student loan they have. Given the repeated exclusion of certain borrowers from the administration’s announced student loan relief initiatives, it would not be surprising if these borrowers get left out yet again.

Further Student Loan Reading

Biden’s New Student Loan Forgiveness Changes May Wind Up Costing Some Borrowers

If Biden Enacts Broad Student Loan Forgiveness, It May Look Like This

Want Student Loan Forgiveness? To Qualify, Borrowers May Need To Do This First

Who Qualifies For Student Loan Forgiveness Under Biden’s Huge New Expansion Of Income Based Repayment

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