More Than 21 Million Borrowers Qualify for Student Loan Relief. Are You One?

A man breaks out of a birdcage with a graduate cap on toward debt relief.
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More than 21 million student loan borrowers are entitled to automatic relief thanks to an unprecedented student loan forgiveness plan, recent court settlements and rule changes from the U.S. Department of Education.

Twenty million borrowers are affected by the Biden administration’s sweeping student debt forgiveness plan announced in August 2022 – primarily canceling $10,000 of loan debt for any borrowers who made less than $125,000 per year (or $250,000 per household).

Several other groups of student loan borrowers will also receive automatic aid unless they choose to opt out. The groups include some current and former service members, borrowers with qualifying permanent disabilities that prevent them from working and attendees of the defunct ITT Tech who inadvertently took out “misleading” loans that the for-profit college chain allegedly disguised as grant money. ITT also mischaracterized future job options and students’ ability to transfer credits.

The group also includes around 200,000 former college students who reached a settlement with their schools over fraud claims, more than half a million defrauded former students who took out loans to attend the Corinthian chain of schools — as well as some 66,000 borrowers who will get automatic loan forgiveness from a settlement reached in early 2022 with the loan servicing company Navient.

Here’s a closer look at who’s receiving the automatic aid.

20 Million Qualifying Borrowers Will Receive Forgiveness

In an unprecedented move, the Biden administration announced a student loan forgiveness plan that eliminates $10,000 of student debt for all borrowers who make less than $125,000 per year (or $250,000 per household). While 43 million borrowers will receive relief from the forgiveness plan, around 20 million – with $10,000 or less in student debt – will see their loans completely eliminated.

Borrowers who went to college on Pell Grants may be eligible to receive $20,000 in forgiveness. Pell Grants don’t have to be repaid but are given based on financial need. The administration also announced a final payment freeze until Dec. 31, 2022.

The plan also allows undergraduate borrowers to protect more of their income from student loan payments – reducing their monthly payment cap from 10% to 5% of their monthly income.

Finally, 3.6 million Parent Plus loan borrowers – parents who took out federal loans to pay for their children’s education – are also included in the plan with the same income restrictions.

The DOE said more details on how borrowers could claim the relief would be released in the weeks following the announcement on Aug. 24, 2022. Eight million of those borrowers are likely to receive automatic forgiveness based on previously known income data. The remaining will likely need to fill out an application available by the end of the year.

560,000 Borrowers Who Attended Corinthian Schools

In early June 2022, the Department of Education announced they would be offering complete student loan forgiveness to 560,000 former Corinthian students. The $5.8 billion in total debt forgiveness was the largest single loan discharge in U.S. history.

Corinthian, a for-profit chain of schools under the names of Heald, Everest and WyoTech, made “pervasive misrepresentations related to a borrower’s employment prospects, including guarantees they would find a job,” according to the DOE. Corinthian also effectively lied about students’ ability to transfer credits and its own public job placement rates.

The chain had more than 110,000 students at 105 campuses at its height in 2010. But, after the DOE announced its initial findings in 2015, Corinthian sold or closed all of its schools.

Those initial findings gave borrowers the opportunity to apply for “borrower defense,” a provision that allowed defrauded students to receive loan cancellation. The DOE said more than 100,000 borrowers had their loans canceled because of the provision.

The department has also made it painless for affected borrowers to receive their loan forgiveness.

“The department will soon begin notifying students who attended Corinthian of this decision, with the actual discharges following in the months after. Borrowers will not have to take any actions to receive their discharges,” according to a DOE release.

323,000 Borrowers with Qualifying Disabilities

For federal student loan borrowers who have qualifying total and permanent disabilities, the U.S. Department of Education is providing $5.8 billion in automatic loan forgiveness, according to an announcement from the agency.

By accessing records from the Social Security Administration and the Department of Veterans Affairs, the Education Department identified an estimated 323,000 borrowers who are eligible for its total and permanent disability (TPD) loan discharge program.

Automatic discharge qualifications include:

  • Participation in a federal student loan program (i.e. William D. Ford Federal Direct Loan program, Federal Family Education Loan program, Federal Perkins Loan program and/or the TEACH Grant service program).
  • A total and permanent disability that prevents you from working, as determined by the Social Security Administration or the Department of Veteran Affairs.

The department was scheduled to complete its latest quarterly data match process in September and notify those who were eligible in the following weeks. The agency discharged the loans at the end of the year.

Going forward, the department told The Penny Hoarder that federal student loan borrowers who are determined to be totally and permanently disabled by the VA or SSA will be identified for automatic discharge on a quarterly basis.

Many other disabled federal student loan borrowers are eligible for a TPD discharge but will have to apply manually — a process which staff attorney Alpha Taylor of the National Consumer Law Center called “overly burdensome.”

“For now, things will remain the same for borrowers who are not eligible for a TPD discharge based on the data matching program with SSA and VA,” Taylor told The Penny Hoarder. “They will still have to complete the overly burdensome TPD application process and submit a physician certification to have their loans discharged.”

363,000 Borrowers Defrauded by ITT Technical Institute

Before ITT Technical Institute closed its doors in 2016, the for-profit school allegedly deceived some students into taking on unnecessary debt.

In August 2022, the U.S. Department of Education announced 208,000 former ITT students would have nearly $4 billion in student debt canceled.

The DOE said ITT Tech widely and pervasively misrepresented students’ future job options and the ability to transfer credits.

“It is time for student borrowers to stop shouldering the burden from ITT’s years of lies and false promises,” said U.S. Secretary of Education Miguel Cardona. “The evidence shows that for years, ITT’s leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause.”

The August announcement comes just a year after the DOE initially targeted ITT’s deceptive practices – with approximately 155,000 former ITT students becoming eligible for debt forgiveness after a review of ITT Tech’s misleading activity.

The education department determined students who attended ITT but did not finish their degree starting as early as March 31, 2008, are now eligible for loan discharges.

To qualify for automatic discharge:

  • You attended ITT Tech on or after March 31, 2008; and
  • You took out qualifying student loans to pay for your schooling; and
  • You did not complete your degree or certificate program.

The education department completed its data match process in September 2021 and began notifying borrowers soon thereafter.

ITT Tech is one of more than 50 defunct schools included in the Department of Education’s Closed School Discharge program. Other schools include The Chef’s Academy, Concordia University, the group of Corinthian Colleges and dozens more.

This discharge program typically provides automatic loan forgiveness to qualifying borrowers three years after a school’s closure. However, if you believe you are eligible and you don’t want to wait three years, you may apply to the program manually to receive a speedier discharge.

200,000 Students Who Received a Fraud Settlement

In 2022, these students reached a settlement in the 2019 class action lawsuit, Sweet vs. Cardona. 

These 200,000 borrowers will see a full discharge of their loans, totalling $6 billion, a refund of what they’ve paid and credit repair starting no later than one year after the agreement formally goes into effect.

Students included in the settlement attended one of more than 150 schools that engaged in misconduct, according to the U.S. Department of Education. Those schools include:

  • The Art Institute
  • Le Cordon Bleu
  • ITT Tech
  • DeVry University
  • Keiser University
  • University of Phoenix
  • Westwood College

According to the lawsuit, many borrower defense claims were ignored by the U.S. Department of Education.

Borrower defense allows former students to discharge some or all of their federal loans if their school engaged in fraud or misconduct. To qualify, former students had to first prove they were misled by their school, which usually involved false job placement rates or the ability to transfer credits.

A silhouette of a graduate against a gray sky.
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66,000 Borrowers Serviced by Navient

Navient reached a settlement with attorneys general in 39 states is over two primary accusations: that it redirected borrowers into forbearance instead of pushing them toward more sensible income-based repayment options; and that through its predecessor, Sallie Mae, borrowers were directed to subprime loans that they knew would likely default.

The settlement canceled $1.7 billion in student loan debt for around 66,000 borrowers and provided $95 million in restitution — around $260 each — to 350,000 borrowers.

According to the settlement statement, borrowers who qualify don’t need to take any further action other than to make sure the U.S. Department of Education has their current address through their account.

Borrowers who qualify for private loan debt cancellation will receive a notice from Navient by July 2022 and will be refunded any payments made on canceled private loans after June 30, 2021.

Federal loan borrowers receiving the approximate $260 restitution payment should have received a postcard from the settlement administrator in the spring of 2022.

47,000 Current and Former Service Members

Due to a data-matching agreement — this time with the Department of Defense — the education department retroactively waived student loan interest for at least 47,000 current and former active-duty service members in August 2021.

This benefit should not be confused with loan discharge, aka forgiveness. It affects only the interest on the loans.

Qualifying service members for this benefit were or are deployed to “areas that qualify them for imminent danger or hostile fire pay,” according to the Department, and must have taken out a federal student loan on or after Oct. 1, 2008.

Only a small percentage of qualifying service members have accessed the benefit. In 2019 before the data-matching agreement, the department said it waived interest for only 4,800 service members.

“Now the department is able to identify federal student loan borrowers who serve on active duty by matching records to DOD’s personnel records,” the Education Department stated in a news release. “As a result, the department can automatically provide the student loan interest benefit.”

What Happens When the Education Department Doesn’t Collect on Student Loan Debt?

Each time the Department of Education forgives a loan, it removes a financial burden for someone who pursued higher education. Simultaneously, the department loses out on money it was owed.

When we’re talking about 43 million borrowers who owe more than $1.7 trillion, the cost of forgiveness can add up quickly. Even the tailored relief provided by the department in 2021 accounts for $9.5 billion.

How does the department operate without those funds? Could loan forgiveness affect the budgets of other aid programs? What about everyone else with student loan debt?

The Department of Education did not respond when The Penny Hoarder posed those questions. However, a recent Brookings report by Adam Looney sheds some light. Looney is a nonresident senior fellow at Brookings, a former deputy assistant secretary at the U.S. Treasury Department and a tax policy expert.

“Even modest student loan forgiveness proposals are staggeringly expensive and use federal spending that could advance other goals,” Looney opens his report.

He argues that blanket student loan forgiveness tends to benefit whiter, better-educated and higher-income people who may not need the aid as badly as others. And while good natured, the cost of widespread forgiveness rivals the spending of unemployment insurance, food assistance programs and other government programs intended for Americans who need the aid the most.

Looney clearly favors more tailored loan forgiveness programs – a stance that, until August 2022 – the Biden administration had followed.

It’s yet to be seen whether more sweeping forgiveness plans are coming or if the federal government returns to focusing their forgiveness efforts for targeted groups.


Robert Bruce is a senior writer for The Penny Hoarder. Former staff writer Adam Hardy contributed.