Any discussion about student loans, should begin with a basic knowledge of:
- Private vs. Federal loans
- Public vs. Private vs. For-profit schools
- Loan Cancellation vs. Discharge vs. Forgiveness
- Income-Driven Repayment (IDR) Plans
Federal vs. Private Student Loans
Student loan debt consists of private loans and federal loans.
Private student loan debt accounts for 7.61% of all student debt and totals $131.1 billion. Private student loan debt is not eligible for federal student loan debt relief.
Over 40 million borrowers have federal student loans totaling around $1.6 trillion in debt and make up 92.7% of all student loan debt. Discussions regarding student loan forgiveness or debt cancellations are regarding federal student loans.
Beware of scams. If you have federal loans, you do not pay to receive federal loan forgiveness or discharge.
|Federal/Direct Student Loans||Private Loans/Refinancing/Consolidation|
|Eligible for federal forbearance or loan forgiveness||Ineligible for federal forbearance or loan forgiveness|
|If you work as a public servant, your loans are discharged after 10 years of repayment under the Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness (TLF)||Not eligible for Teacher Loan Forgiveness (TLF) or Public Service Loan Forgiveness (PSLF)|
|If you die, loans are discharged||If you die, debt passes to your estate (spouse, parent, or loved one)|
|After 20-25 years of repayment in an income-driven repayment (IDR) plan, remaining balance discharged||Many require payments while you are in school, but some allow you to defer payments while in school.|
The average college graduate has $37,102 in student loan debt, a 78% increase from ten years ago.
Baby boomers carry the most student loan debt averaging $43,678 according to a Credit Karma study of its members.
Once the federal forbearance pause is lifted, on June 30, 2023, the average borrower will experience a 17% jump in their student loan monthly payments, according to an Equifax student loan crisis report. Additionally, the report anticipates that after the pause is lifted and delinquency and defaults will increase, younger people with less credit history will suffer the most.
Public vs Private nonprofit vs For-profit schools
Depending on the type of school you attend, your tuition and costs will vary.
|Public Colleges/Universities||Private Non-Profit Colleges||Private For-profit Schools|
|Funded by the state and federal government, includes community colleges.||Tax-exempt receiving funding from tuition, investments, and donations (ie Northwestern University, University of Chicago, New York University, Duke University).||Puts tuition revenue into people — splitting earnings among owners, investors and shareholders at the institution — rather than back into the school (ie ITT, Corinthian, Westwood, and DeVry University).|
Public institutions receive funding from the state and federal government and tend to be the least expensive.
Private nonprofit colleges are tax-exempt and get funding from tuition, investments, and donations. They tend to be more expensive than public colleges and universities.
For-profit schools’ costs vary, but more than 70% of for-profit students borrow federal loans and account for 50% of all student loan defaults. Also, for-profit students are three times more likely to default on student loans and six times less likely to receive employment after enrollment compared to public college students per a NBER study.
Loan Cancellation vs Discharge vs Forgiveness
The terms are used interchangeably, but they actually have different relief for borrowers.
Loan discharge happens after being in repayment or an event occurs, like the death of the borrower. There are several types of loan discharge, like income-driven repayment (IDR), disability discharge, closed school discharge, borrower’s defense discharge, and death of the borrower.
Loan forgiveness is usually offered due to your job, like Teacher Loan Forgiveness (TLF) or Public Service Loan Forgiveness (PSLF).
Loan cancellation is like the up to $20,000 in debt cancellation proposed by the Biden administration, currently before the U.S. Supreme Court.
|Loan Cancellation||Loan Discharge||Loan Forgiveness|
|Cancellation of debt, like the up to $20,000 in debt cancellation proposed by Biden that is currently before the U.S. Supreme Court||Discharge happens after years of repayment or an event occurs. Income-driven Repayment (IDR) Total & Permanent Disability Discharge Closed School Discharge Borrower Defense DischargeDeath of the borrower||If you’re no longer required to make payments on your loans due to your job, this is generally called forgiveness. For example: (1) Teacher Loan Forgiveness (TLF); or (2) Public Service Loan Forgiveness (PSLF).|
Income-Driven Repayment (IDR) Plans
When you start repaying your federal loans, you have several options. Income-driven repayment (IDR) plans base monthly payments on the borrower’s income, unlike standard payment plans.
An additional benefit of IDR plans is that after 20-25 years of repayments, the remaining balance would be discharged.
Federal ParentPlus loans are generally excluded from IDR plans, unless consolidated in the income-contingent repayment plan.
Resources for Borrowers
There are several organizations and advocate groups for borrowers. Below are just a few. Many work with other borrower organizations, so if they can’t assist you then can most likely point you in the right direction.
|Student Debt Crisis Center (SDCC)||Webinars on loan forgiveness applications, including ParentPlus and PSLF. Advocacy for borrowers.|
|Student Borrower Protection Center (SBPC)||Webinars on loan forgiveness applications, including ParentPlus and PSLF. Provides legal advocacy for borrowers’ rights.|
|The Debt Collective||A debtors’ union fighting to cancel debts and defend millions of households.|
|American Federation of Teachers (AFT)||Advocacy for educators on Teacher Loan Forgiveness (TLF) and PSLF.|
|Project on Predatory Student Lending (PPSL)||Representing students against the predatory for-profit college industry, Sweet v. Cardona and Florida HCI College.|
|National Consumer Law Center (NCLC)||Uses advocacy, education, and litigation to fight for economic justice.|
|Consumer Financial Protection Bureau (CFPB)||Tools and resources for borrowers to file complaints against institutions re: student loan debt.|
|Fresh Start Program – FSA Default Group||Assistance for borrowers in default on student loans.|
|Ombudsman Group – Dept of Education||Assist borrowers in resolving student loan issues, as a last resort after trying to resolve with loan servicer or college unsuccessfully.|
|NAACP||Advocacy for borrowers.|
|DOJ Guidance on Bankruptcy||Borrowers filing for bankruptcy have new guidelines.|
|Closed School Loan Discharge||Federal Student Aid (FSA)|
|Borrower Loan Defense Discharge||Apply on the FSA website|