What Is Student Debt?
Student debt is the money owed on a loan taken out to pay for educational expenses. Individuals can borrow student debt through the government.
Student Loan Forgiveness
Graduates with federal student loan debt who qualify for special repayment plans, such as income-based repayment, may also qualify for debt forgiveness.
Debt Relief Programs
In August 2022, the Biden administration attempted to cancel up to $20,000 in student loan debt for borrowers with Pell Grants and $10,000 for other borrowers at a cost of $430 billion. On June 30, 2023, the Supreme Court struck down this plan in a 6-3 decision. The justices in the majority found the forgiveness program overstepped the bounds of federal law and usurped the power of Congress to control government spending.4
In response to the decision, the White House unveiled the Saving on a Valuable Education (SAVE) Plan, a new income-driven repayment (IDR) option for borrowers. The SAVE plan reduces monthly payments to 5% of discretionary income for undergraduate borrowers. It also changes the discretionary income formula so that an estimated one million low-income borrowers will have their payments set at $0 per month. Furthermore, unpaid interest is no longer added to student loan balances, ensuring the amount you owe will not grow as long as payments are kept up to date. Another measure under SAVE provides loan forgiveness after 10 years for those with balances of $12,000 or less.5
— Student Debt: What It Means, How It Works, and Forgiveness (Investopedia, September 21, 2023)