What to do while waiting for a possible upcoming student loan forgiveness

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Contact your lender

Due to the pandemic-era payment pause on student loan bills, most borrowers haven’t made a payment in more than two years. Now the bills are expected to hit mailboxes again in September.

Even if some student debt is forgiven, you might still have a balance and you’ll want to check your loan account. There will be a lot to find out: Did you get the relief you deserve? If you have a bottom tab, what is it?

Also, make sure your loan manager has all of your current contact information, so you can stay up-to-date with any of these changes. You can update your information with your loan officer at StudentAid.gov.

The fact that millions of borrowers will have new loan service when payments resume due to industry changes adds a bit of a mess here.

Affected borrowers should receive multiple notices, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

In September, if you mistakenly send a payment to your old repairer, the money must be transferred to your new one, Buchanan said.


Again, don’t count on canceling your student loan to wipe out your entire balance.

“In all likelihood, student loan forgiveness will be limited in terms of eligibility and amount, so you can’t rely on it to wipe out all of your student loan debt,” Kantrowitz said.

Student loan forgiveness, if it occurs, will likely be limited to federal loans only

Marc Kantrowitz

higher education specialist

For example, a write-off of $10,000 would only fully erase debt for one-third of borrowers.

As a result, Kantrowitz recommends starting to save money now to lessen the pain of picking up bills.

Delay refinancing

Even though interest rates are low right now, Kantrowitz said borrowers should think twice about refinancing their debt with a private lender.

“Student loan forgiveness, if it occurs, will likely be limited to only federal loans,” he said.

You don’t want to miss out on debt cancellation while pursuing a lower interest rate.

Try to make sure you will qualify for the relief

Millions of people who took out student loans before 2010 under the federal Family Education Loans program have been excluded from the government’s offer to suspend their interest-free payments during the coronavirus pandemic.

It is feared that these borrowers could also be excluded from any student loan forgiveness.

As a result, FFEL loan holders may want to contact their manager and consolidate them into the main direct loan program, which will be eligible for the discount, Kantrowitz said.

The main downside of doing this is that your repayment schedule will be reset and so if you’re close to the end, it might not make sense.

Don’t worry about taxes

Student loan forgiveness is now tax-free, thanks to a provision included in the $1.9 trillion federal coronavirus stimulus package that became law in March 2021.

Previously, any student loan debt canceled by the government was considered taxable and levied at the borrower’s normal tax rate.

According to a rough estimate by Kantrowitz, a $10,000 cancellation would have triggered an additional $2,000 in taxes for the average borrower. If $50,000 per borrower were forgiven, the average person would have to write a check to the IRS for $10,000.

Borrowers would now be rid of these bills.

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