What Happens If My Student Loans Are Not Forgiven?

If you apply for student loan forgiveness and your application is rejected, the U.S. Department of Education will typically notify you of its decision and explain what made you ineligible for debt relief. As such, you’ll still be responsible for repaying the rest of your student debt.

Fortunately, there are several relief programs you may be able to take advantage of, in addition to other methods of reducing your debt burden.

What Is Student Loan Forgiveness?

Student loan forgiveness is a form of student debt relief where some or all of past student loans are canceled, absolving borrowers of their financial responsibilities. Some long-standing student loan forgiveness programs include Public Service Loan Forgiveness (PSLF), income-driven repayment (IDR) plans, and Teacher Loan Forgiveness. However, all existing forgiveness programs require a certain number of loan payments and often other stipulations to qualify.

By contrast, President Biden’s loan forgiveness plan unveiled in August 2022 would cancel debt based on the borrower’s current income and income level when attending college. Single borrowers making less than $125,000 or married borrowers with a household income of less than $250,000 would qualify for $10,000 in debt cancellation. Students who qualified for an income-based Pell Grant are eligible for an additional $10,000 in debt cancellation.

The U.S. Supreme Court heard arguments on Feb. 28, 2023, on two challenges to the Biden-Harris administration’s student loan forgiveness plan. If the court decides to overturn Biden’s plan, student loan payments will resume 60 days after the ruling. If there is no ruling by June 30, 2023, payments will resume 60 days later. Once those payments resume, it’s back to business as usual. Loan payments will continue at the same interest rate and payment amounts as when the payments were first put on hold in 2020.

Which Student Loans Are Eligible for Forgiveness?

Public Service Loan Forgiveness (PSLF)

Employees of a U.S. federal, state, local, or tribal government or not-for-profit organization can apply for Public Service Loan Forgiveness (PSLF). The PSLF program forgives any outstanding balance on an eligible borrower’s direct loans after they’ve made 120 qualifying monthly payments as part of a qualifying repayment plan, as long as they are also working full time for a qualifying employer.

Only William D. Ford Federal Direct Loan Program loans are automatically eligible for PSLF. However, if your loans are under the Federal Family Education Loan (FFEL) program or the former Perkins Loan Program, these will also be eligible for PSLF if they are first consolidated into a direct consolidation loan.

If the Department of Education determines that a borrower is ineligible for loan forgiveness, they will be notified of its decision and provided with the reason(s) why they were disqualified. Afterward, they will be required to resume making payments on their loans.

Income-Driven Repayment (IDR) Plans

Borrowers unable to pay off their federal student loan debt within the typical 10-year time frame can apply for an income-driven repayment (IDR) plan. These plans establish a more affordable monthly payment based on a borrower’s income and family size. IDR plans also have longer repayment periods (20 or 25 years, depending on the plan) than a Standard Repayment Plan (10 years), but any outstanding loan balance at the end of the new repayment period will be forgiven.

There are four types of IDR plans: Revised Pay as You Earn (REPAYE), Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). These are also the repayment plans that can be used to make the 120 monthly payments required to qualify for PSLF.

The Biden-Harris administration also proposed new regulations in January 2023 that would lower the threshold for the REPAYE plan. If the regulations are solidified, it would mean that single borrowers earning less than $30,600 or families of four earning less than $62,400 would have $0 payments. Those who don’t qualify for $0 payments would have their monthly payments on undergraduate loans reduced by 50%.

President Biden’s One-Time Federal Student Loan Forgiveness

The Biden-Harris administration’s student debt relief plan forgives multiple types of federal loans, including:

• William D. Ford Federal Direct Program Loans
• Federal Family Education Loan (FFEL) Program loans, whether held by the Education Department or in default with a guaranty agency
• Federal Perkins Loan Programs held by the Education Department
• Defaulted loans, including subsidized and unsubsidized Stafford loans, Parent Loan for Undergraduate Students (PLUS), Graduate PLUS, and Perkins loans held by the Education Department
• Consolidation loans that included federal loans held by the Education Department and were consolidated on or before June 30, 2022
• Consolidation loans not held by the Education Department as long as they were consolidated before Sept. 29, 2022
  

To see if you qualify for Biden’s student loan forgiveness plan, you’ll need to check your 2021 or 2022 taxes. Eligibility is based on your current earnings.

You qualify if your adjusted gross income is less than $125,000 if you are:

• Single
• Married filing separately

You may still be eligible if you make up to $250,000 if you are:

• Married filing jointly
• Head of household
• A qualifying widow(er)
  

Teacher Loan Forgiveness

Borrowers who teach full time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency may be eligible for forgiveness on their direct or FFEL Program loans. To be eligible, teachers must be considered “highly qualified;” hold a bachelor’s degree and full state certification as a teacher; and have subsidized direct loans, unsubsidized direct loans, subsidized Stafford loans, or unsubsidized Stafford loans.

Eligible borrowers can receive a maximum forgiveness amount of $17,500, but this varies based on what they teach. The $17,500 amount only applies to secondary school mathematics and science teachers as well as highly qualified elementary or secondary level special education teachers. Highly qualified full-time elementary or secondary education teachers, meanwhile, can receive $5,000.

Which Student Loans Are Not Eligible for Forgiveness?

Unfortunately, any privately held loans are not eligible for federal student debt forgiveness. If you consolidated your federal loans with other private loans to create one loan amount, then your prior federal loans are not eligible. If you have private loans, you may consider refinancing to receive a lower interest rate or more favorable repayment schedule, but they cannot be forgiven.

What Do You Do If You Don’t Qualify for Student Loan Forgiveness?

There are several options if you don’t qualify for student loan forgiveness.

• Refinancing: Refinancing is one of the most straightforward ways to negotiate your interest rate and payment plan. When you refinance your student loan, you can apply for a lower monthly payment that could fit your budget better. Remember that lowering your monthly payment will likely add years to your loan, making your total debt bill much higher.
• Other relief programs: Programs like PSLF, IDR plans, and teacher loan forgiveness can create an endpoint for those with significant debt.
• Deferment and forbearance: If your loans are in good standing, then deferment and forbearance can provide temporary relief. Deferment means a brief pause in payments, while forbearance allows borrowers to pause or reduce payments for up to a year. Be warned, however: Loan interest will continue to accrue during your deferment or forbearance. While these tools relieve extreme pressure, they will not solve a long-term payment issue.

The Bottom Line

Student loan forgiveness could make a massive difference in the financial lives of many borrowers. Still, even if you’re rejected by one program, other options are available to make payments more manageable. FederalStudentAid.gov offers a wealth of resources for those needing help finding the best payment plan or course of action after the payment pause ends.