You may be eligible for relief now and not know it
Groups that advocate on behalf of student loan borrowers are demanding that the U.S. Department of Education automatically wipe out the student debt of many disabled borrowers who are eligible for relief but haven’t received it or don't even know they're eligible.
Many of those borrowers include older Americans carrying student loan debt for children and grandchildren.
"By our estimate, these changes could provide an estimated $14 billion in student loan discharges to approximately 400,000 student loan borrowers experiencing 'total and permanent' disabilities," says Alex Elson, counsel and co-founder of the National Student Defense Legal Network, which is leading the campaign.
Student Defense, as the group also is known, filed a petition on Monday claiming the department requires eligible borrowers with disabilities to fill out "an unnecessary and byzantine application" to have their loans discharged.
Senators want millions of borrowers out of 'default'
Meanwhile, a group of Democratic U.S. senators, led by Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia, this week urged the department to automatically remove all eligible federal student loan borrowers from "default" status.
In a letter, the lawmakers say the move would ensure that 7.5 million borrowers won’t immediately face garnishment of wages, tax refunds and Social Security benefits when a nationwide pause on student loan payments and interest ends in September.
"During this unprecedented pandemic, tens of millions of Americans have struggled to pay bills and put food on the table for their families," the letter says.
Removing default records could help borrowers gain access to credit, and better interest rates on home mortgages or credit cards.
Where broad student loan cancellation now stands
President Biden, who has said he would be willing to cancel $10,000 in student debt per person, has asked the Education Department to look into whether he could use his executive authority to forgive $50,000 in debt without approval from Congress.
In a conversation Wednesday with the National Education Association — the country's largest teachers union — Education Secretary Miguel Cardona addressed the student debt crisis but failed to provide specific details about the administration’s plans.
"We’re working closely with the White House to try to see how we can help support our learners and the loans they have now,” Cardona said. "They’re on pause now but eventually those loans either have to be paid or there has to be some way to support our students many of them who have been negatively impacted by the pandemic."
To help pave the way for broad student loan forgiveness, the bill Biden signed last month providing $1,400 stimulus checks included a provision making canceled student loans tax-free until 2026. Normally, forgiven debts are taxed as income.
Options for borrowers who need help now
If you haven’t been included in any of the student debt forgiveness so far, there are a few ways to give yourself some relief if you're facing overwhelming college debt.
First, look into refinancing your student loans. Interest rates for private student loans have hit record lows, so replacing your federal student debt with a new and cheaper loan from a private lender could cut your monthly payments substantially.
But understand that refinancing out of a federal loan would disqualify you if any federal loan forgiveness comes along.
If you own a home, you could refinance your mortgage instead — to keep your student loan debt from cratering your household budget. Some 13 million homeowners still have an opportunity to save an average $283 a month with a refi, according to the mortgage data and technology firm Black Knight.
Finally, explore ways to grow your income. If you've wanted to dip your toe in the stock market but haven’t had much cash to play with, use an app that lets you earn returns in the market simply by investing your "spare change".