Dan Currell, former Deputy Under Secretary and Senior Advisor at the U.S. Department of Education, delves into the student loan arena to amass a thorough compilation of information and resources for borrowers regarding recent student loan forgiveness updates and repayment.   

Student loans are big news, and the landscape has never been more confusing.  Unfortunately, most information about student loans is incomplete, inaccurate, or impenetrable.  It’s exhausting.  Friends often ask me about it because I worked at the Department of Education, so I sat down to write the simplest FAQ I could with every answer linked to an original government source. 

Of course, this isn’t financial or legal advice. But with that caveat, here’s where we stand in September, 2023. For changes that may occur after September 2023, the authoritative resources are the student loan pages of Federal Student Aid (FSA) and the U.S. Department of Education (ED). In many areas, the Consumer Financial Protection Bureau (CFPB) also provides excellent resources.

Table of Contents

• Student Loan Forgiveness Update
• The Student Loan Repayment Pause
• Payment Practicalities
• Different Repayment Plans
• Payment Problems
• Other Paths to Student Loan Forgiveness
• Interest Rates and Costs
• Borrowing Limits and Other Options
• Parent Borrowers
• A Few Other Student Loan Questions

Student Loan Forgiveness Update

1. What happened to student loan forgiveness?  

Announced in August 2022, the Biden-Harris Student Debt Relief Plan would have forgiven up to $10,000 in federal student loan debt for each borrower whose individual income was below $125,000 or household income was below $250,000.  Pell Grant recipients would have received up to $20,000 in loan forgiveness under the plan. It was blocked by the Supreme Court in June 2023.

2. Why did the Supreme Court block the debt relief plan?  

In Biden v. Nebraska, the Supreme Court ruled that the Department of Education (ED) didn’t have the authority to forgive loans on the basis of the HEROES Act. 

3. Is there another way for the Department of Education (ED) to provide broad-based debt relief?

ED still might be able to forgive loans on the basis of the Higher Education Act. The Department initiated the required “negotiated rulemaking” process the same day the Supreme Court released its decision in Biden vs. Nebraska. The first public hearing to receive comments on the new debt relief plan was held on July 18th; you can see an ED official explain what they hope to accomplish in this video.

4. Why are some people having their loans forgiven anyway?  

Some people were eligible for student loan forgiveness under Public Service Loan Forgiveness (PSLF) or the Borrower Defense rule, but had not had their loans forgiven yet.  The administration has reassessed these programs and some borrowers have had part or all of their loans forgiven.

• Education Department Approves Borrower Defense Claims
• Biden-Harris Administration to Provide Borrowers with Loan Forgiveness as Result of Fixes to Income-Driven Repayment Plans

5. What happens next?  

When the Supreme Court’s ruling came out, the Biden administration announced three actions on student debt:

• Proposing a new debt relief program based on a different statute. This involves a rulemaking process that normally takes a year or more, and it may be challenged in court.
• Creating a new income-driven repayment (IDR) option that allows most borrowers to pay less each month, and some to pay nothing.
  Saving on a Valuable Education (SAVE) replaces REPAYE, one of four existing IDR plans.
• Instituting a 12-month “on-ramp” to repayment during which missed payments are not considered delinquent or reported to credit bureaus. Borrowers who can make payments should do so, as payments will be due and it appears that interest will accrue during this on-ramp period. As of the date of publication, information about the 12-month on ramp is limited, but we expect updates from FSA and ED in the coming months.

The Student Loan Repayment Pause

6. What happened to the student loan repayment pause?  

In March of 2020, the government set the interest rate on most federal student loans to 0% and suspended student loan payments. In June of 2023, the President signed a law requiring the pause to end on September 1, 2023.

7. When do student loan payments resume?  

Under the Fiscal Responsibility Act of 2023  signed by President Biden in June, interest on federal student loans will begin to accrue again on September 1, 2023 and payments will resume in October.

Payment Practicalities

8. How do I pay? 

You can start by reading Federal Student Aid’s guide to preparing for loan repayment. Your student loan payment will go through a loan servicer; you can log in to your Federal Student Aid account to find out who your servicer is. You can also call call the Federal Student Aid Information Center at 1-800-433-3243. Servicers should contact borrowers before student loan payments resume in September-October.

9. How much will my payment be? 

Your payments are likely to be the same as before unless you’ve taken steps to change them, such as enrolling in an income-driven repayment plan. If you aren’t sure what your monthly payment will be, log in to your Federal Student Aid (FSA) account to find out.

10. How should I decide between the different ways to pay back my student loans? 

ED has a loan simulator to help you compare different repayment options.

Different Repayment Plans

11. Can I consolidate multiple loans into one?

Most borrowers have a series of different loans disbursed at different times, often at different interest rates. Consolidation loans allow borrowers to have a single loan with a single payment. Consolidating student loan debt can in some cases make it harder to access income-driven repayment plans like SAVE or loan forgiveness programs like Public Service Loan Forgiveness. Consolidating student loans with a private lender will generally render those loans ineligible for forgiveness and alternative repayment plans. On the other hand, consolidating loans is absolutely necessary to qualify for income-contingent repayment if you have a Parent PLUS loan.

12. What is income-driven repayment, or IDR? 

Income-driven repayment plans let borrowers pay a percentage of their discretionary income each month. The point of IDR as opposed to other repayment plans is to reduce each month’s payment. Of course, this means that loans are paid off more slowly, but some IDR programs – and particularly the SAVE plan – allow unpaid balances to be forgiven after a period of years in which the plan’s payment requirements are met.

13. What are the differences between different income-driven repayment plans?

Choosing the right plan is very important, as the wrong choice can cost thousands of dollars and years of lost credit towards forgiveness. As with so many areas of student loans, there’s no substitute for reading the fine print.

Existing IDR options are described at this link, and they include:

• Saving on a Valuable Education Plan (SAVE) – formerly Revised Pay As You Earn (REPAYE)
• Pay As You Earn  (PAYE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)

Borrowers currently enrolled in REPAYE will automatically be enrolled in SAVE, but borrowers in other IDR plans will need to log in and request enrollment in SAVE if they are eligible.

14. How do I know if income-driven repayment is better for me, and which plan to use? 

The Department of Education has a loan simulator to compare repayment options. One category of borrowers, however, has only one option: Parent PLUS borrowers must use Income-Contingent Repayment, described in the “Parent Borrowers” section below.

15. Where can I apply for income-driven repayment? 

You can apply for IDR here.

16. Can I extend my payments over a longer period without doing income-driven repayment? 

The Extended Repayment Plan allows borrowers to extend their repayment – e.g., from ten years to twenty.

Payment Problems

17. Can I stop or delay making loan payments for a while? 

There are two main ways to do this – deferment and forbearance.  In deferment, accumulated interest is added to the loan principal, or “capitalized.”  Forbearance is like deferment, but the interest does not capitalize.  Forbearance is better, but it’s only available under certain circumstances.

18. What happens if my loan payment is late? 

Your payment is delinquent when it arrives one or more days past its due date. Delinquencies of 90 days or more are generally reported to the three credit bureaus (Equifax, TransUnion and Experian), who hold the data used by VantageScore and FICO to calculate your credit score. That said, ED plans to implement a twelve-month “on-ramp” to repayment during which delinquent payments will not be reported to credit bureaus.

19. What if I default?

Student loans are generally in default after nine months of non-payment, though in some cases default can result from a single late payment. Default is very harmful. Once a borrower is in default:

• The full balance of principal and interest is immediately due (“acceleration”)
• The default is reported to credit bureaus and hurts the borrower’s credit score
• The borrower loses eligibility for deferment and forbearance
• The borrower loses eligibility for further federal student aid
• The borrower is likely to experience tax and wage garnishment and legal collection actions

20. If I have defaulted in the past, what should I do? 

Consider entering the Fresh Start program, which ED created to enable defaulted borrowers to restore their repayment status and regain access to other federal student aid benefits and protections. The program is expected to have a positive impact on defaulted borrowers’ credit scores.

21. What happens if I declare bankruptcy? 

In most cases, your student loans will still be due. For over 30 years it has been all but impossible to have them discharged (i.e., forgiven) in bankruptcy. Late in 2022, the Biden administration announced an effort to make it more feasible to have student loans discharged in bankruptcy. But the law hasn’t changed, so it still won’t be easy to get rid of student loans in bankruptcy. (I should note that in rare circumstances involving private student loans, bankruptcy has been successfully used.)

Other Paths to Student Loan Forgiveness

22. Are there other ways to have loans forgiven now that the Biden-Harris program isn’t happening? 

Maybe – here are a few of the possibilities:

• The New Biden-Harris Debt Relief Plan. Details are TBD. It will take over a year to develop because it needs to go through negotiated rulemaking. It will be very surprising if the new debt relief plan is not challenged in court; there’s no telling how that litigation will come out.
• Saving on a Valuable Education (SAVE). The current version of SAVE reduces monthly payments and may result in some forgiveness for borrowers. More provisions of SAVE may be implemented in July 2024, which could further reduce or eliminate some payments.
• Public Service Loan Forgiveness (PSLF). Borrowers working in certain public and nonprofit jobs may qualify for student loan forgiveness after a period of repayment. Many loan balances have recently been forgiven under this program. These resources can be used to assess whether a borrower is eligible.
• Teacher Loan Forgiveness (TLF). Some teachers may be eligible for debt relief under this program.
• Teacher Education Assistance for College and Higher Education (TEACH) Grants. This program provides grants to those who qualify and fulfill a teaching service obligation, generally for four years. If a TEACH grant recipient doesn’t fulfill those requirements, the grant converts to a loan that must be repaid with interest. Aspiring teachers can apply for a TEACH grant of up to $3,772 per year.
• Borrower Defense to Repayment – Borrowers who went to a for-profit college and were misled or defrauded by that college may be eligible for debt relief.

Interest Rates and Costs

23. What’s the interest rate on federal student loans? 

In 2023-24, rates for new loans range from 5.50% to 8.05%. Interest rates are fixed for the life of federal student loans unless the loan is refinanced or consolidated; interest rates are determined by a formula in the Higher Education Act. In the past 15 years, rates have been as low as 2.75% (in 2020-21) and as high as 8.5% (PLUS loans from 2006 to 2010). Private or state student loans can sometimes offer lower interest rates and/or lower origination fees, but do not generally have income-driven repayment or forgiveness options.

24. Are there other loan costs to consider? 

Federal student loans charge an origination fee. As of 2023, Federal student loan origination fees are around 1%, but parent and graduate PLUS loans have an origination fee of around 4%. Private and state loan origination fees vary.

Borrowing Limits and Other Options

25. How much federal money can I borrow for college?

Per the Federal Student Aid 2023-24 Handbook, undergraduates who are still dependents of their parents can borrow $5,500 for their first year, $6,500 for their second year, and $7,500 for each of their third, fourth and fifth years, with a total borrowing maximum (“aggregate loan limit”) of $31,000. Undergraduates who are independent from their parents can borrow $9,500, $10,500 and $12,500 for those years, up to a maximum of $57,500. (Note: getting classified as independent for these purposes is very hard to do before the age of 24.)

26. How much federal money can I borrow for graduate school? 

Graduate students can borrow much more than undergraduates: up to $20,500 per year in direct loans up to a total of $138,500 including undergraduate debt. Beyond that, you can borrow up to the school’s Cost of Attendance as a Direct PLUS loan.

27. What about private student loans? 

Private loans are market-driven, so how much you can borrow and on what terms is up to the lender. Private loans are very unlikely to be forgiven, and they generally don’t have forbearance or income-driven repayment options. But they can at times be cheaper than federal loans depending on the origination fee and interest rate. This comparison chart reviews some of the characteristics of private and federal loans.

28. Are there other sources of student loans? 

Some states have student loan programs – here are examples from Minnesota and Texas.  Deferment, forbearance, payment terms, and potential forgiveness will depend on state law.

Parent Borrowers

29. Can I take out loans to pay for my child’s college? 

Yes – federal loans of this kind are called Parent Loan for Undergraduate Students, or PLUS loans.  There are also private loan options for parents, and some states have parent loans.

30. How much can I borrow for my child’s college or graduate education? 

Under the Direct PLUS program, parent borrowing is unlimited and not means-tested, though the loan cannot exceed the school’s Cost of Attendance minus existing financial aid. In 2023-24, PLUS loans have a 4% origination fee and an 8.05% fixed annual interest rate.

31. If I take out a federal Parent PLUS loan to help a child pay for college, what are the repayment options? 

Parent PLUS loans are not eligible for income-driven repayment plans, as explained by ED here, and also by the CFPB here, but a parent borrower may be eligible for income-contingent repayment (ICR) and potentially Public Service Loan Forgiveness (PSLF) after the PLUS loan has been consolidated into a Direct Loan.

A Few Other Student Loan Questions

32. What is the Free Application for Federal Student Aid (FAFSA)?
FAFSA is the main form students and families fill out to apply for federal student loans and grants.

33. What is the College Scholarship Service or CSS Profile?
CSS is a form used, in addition to FAFSA, by about 250 selective institutions to determine private scholarship eligibility. 

34. What is Loan Entrance Counseling?
All federal student loan borrowers must complete loan counseling to inform them about how their loans work. 

35. What is a Loan Servicer?
A loan servicer is a company assigned by ED to handle the billing and other services on federal student loans, such as income-driven repayment plans and loan consolidation. Since 2010, the money for federal student loans has all come from the federal government (before that, the government subsidized and underwrote loans that came from banks and other lenders like Sallie Mae). People sometimes refer to servicers as lenders, but that’s usually wrong: the government is the lender, and the servicer is collecting payments on the government’s behalf.

36. What is a Perkins Loan?
Perkins loans were 5% fixed-rate federal student loans. The program ended in 2017, but Perkins loans are still mentioned sometimes because many borrowers are still in repayment.

37. What is a Stafford loan? 
Stafford loans have not been offered since 2010, having been replaced by the William D. Ford Federal Direct Loan Program.  But as FSA notes, some schools still refer to “Stafford loans” when they mean to say Federal Direct Loans.  When schools (examples here and here) refer to Stafford loans, they mean Federal Direct Loans.

38. What is a Federal Family Education Loan (FFEL)?
FFEL is a retired student loan program.  FFEL loans are no longer originated, but some borrowers are still in repayment on FFEL loans.

39. What is a Health Education Assistance Loan (HEAL)?
HEAL was a loan program for medical and nursing students. HEAL loans have not been issued since 1998, but some borrowers are still in repayment.

Borrowers have the hardest job here. Financial aid officers, private lenders, the Department of Education, the Consumer Financial Protection Bureau, Congress, and state lenders each play defined roles. But borrowers have to consider the value of a degree, labor markets, family resources, origination fees, interest rates, repayment plans, forgiveness options, forbearance, deferment, and much more. For America’s students and graduates, I hope this FAQ clears away some of the fog.

Dan Currell was Deputy Under Secretary and Senior Advisor at the U.S. Department of Education from 2018 to 2021. 
He is CEO of the Digital Commerce Alliance and an author and commentator on education policy.