The cost of student debt cancellation varies greatly by proposal, with estimates for large-scale plans ranging from hundreds of billions to over $1 trillion, depending on scope, like President Biden's broader plans costing potentially over $1 trillion (including existing SAVE plan impacts) versus initial proposals around $300-$400 billion for $10k-$10k relief, with analyses from groups like the Committee for a Responsible Federal Budget (CRFB) and Penn Wharton Budget Model (PWBM) showing significant taxpayer impact, while some relief has already been implemented through existing programs, costing less than face value due to projected loan non-repayment.
Including the Biden Administration's new student debt cancellation plan, we estimate all recent student debt cancellation policies will cost a combined $870 billion to $1.4 trillion. That's more than all federal spending on higher education over the nation's entire history.
Canceling student loan debt could help with economic opportunities by making other wealth-creating investments, such as homeownership, more feasible. Student debt has led to a 20 percent decline in homeownership among young adults. Cancellation could help reverse this trend.
If you have already received the loan funds, you have up to 120 days after the date of disbursement to cancel all or part of your loan and return the funds yourself to the U.S. Department of Education. Contact your Direct Loan Servicer for guidance on how and where to return your loan money.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
Federal student loans can be wiped out after 20 or 25 years under Income-Driven Repayment (IDR) plans, while Public Service Loan Forgiveness (PSLF) offers forgiveness after 10 years for public service workers, but there's no set age for all loans to disappear, with some private loans having statute of limitations for collections but not erasing the debt itself. Forgiveness under IDR happens at the end of the repayment term, not automatically after a certain age, though the U.S. Department of Education is working on one-time forgiveness for long-term borrowers.
Cancellation & Forgiveness Options
If you leave or suspend your course
You need to contact us and get your university or college to tell us as well. We'll stop any future payments and work out how much student finance you're entitled to.
If you have loans that have been in repayment for more than 20 or 25 years, those loans may immediately qualify for forgiveness. Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones.
Debt settlement can hurt your credit, hinder your long-term financial prospects, come with hefty fees and have tax implications, among other risks. Scams are also possible. Debt settlement can allow you to pay off your debts for less than you owe, but it has risks you should be aware of before considering it.
Total and Permanent Disability (TPD) Discharge
This can be a physical or a mental disability. If you get a TPD discharge, you don't have to repay any of your federal student loan(s) or complete your Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.
Mass cancellation would incentivize much greater inflation as neither colleges nor prospective students would believe future loans would have to be repaid, blowing the lid off of prices.
So for current English students and all those who started since September 2023 your loan will wipe 40 years after the April after you left university. In all of these it's the April after you left university that's the key point.
There are some situations where paying off your student loan can save you money, but this is only usually the case for very high earners. Even then, these people could still benefit from saving this money for a rainy day.
Who qualifies for 2022 student loan forgiveness? To be eligible for student loan debt cancellation, borrowers must have a 2020 or 2021 tax year income of less than $125,000 for individuals and less than $250,000 for married couples or heads of household.
Loan Forgiveness Timeline: Federal student loans can be forgiven after 10 years through Public Service Loan Forgiveness (PSLF) or after 20-25 years under Income-Driven Repayment (IDR) plans.