While broad student debt cancellation of up to $20,000 is stalled in the courts, other wheels have been turning when it comes to forgiveness. More federal student loan borrowers than ever are getting their debt discharged. And it’s changing their lives.

More than 200,000 people have seen their debts discharged so far under just one federal forgiveness program.

But things start looking up even before their balances get to $0.

As their count of remaining payments nears the finish line, a new study finds, borrowers’ psychological stress starts to decline, and they report lower rates of self-destructive behaviors like drug and alcohol abuse or thoughts of suicide. Financial stress lessens and there are corresponding improvements to credit scores, as well as higher homeownership rates.

“I think when you get close to forgiveness, it starts to change the mental maps of people,” says Dan Collier, assistant professor in the leadership department at the University of Memphis, who helped write the report for the Student Borrower Protection Center, or SBPC.

The results come from surveying 785 student loan borrowers who are aiming for or who already received Public Service Loan Forgiveness. Up to this point, it was unclear exactly what kind of impacts that forgiveness could have on borrowers.

“The only reason why this research can exist is because the Biden administration fixed PSLF,” says Collier.

What’s the problem with Public Service Loan Forgiveness?

Public Service Loan Forgiveness aims to forgive debt for borrowers who work full time for public service employers while making payments for roughly 10 years. But between technicalities that disqualify borrowers and the difficulty of getting through 10 years’ worth of paperwork, only 2.4% of PSLF applications had been approved as of October 2021.

Existing federal programs like Public Service Loan Forgiveness have been long mired in dysfunction. In the background, the Biden administration has been steadily making incremental improvements to deliver relief to more borrowers than ever.

A total of 215,555 among 360,000 qualifying federal loan borrowers have already received discharges through the long-fraught program using a yearlong waiver of past payment rules that expired on Oct. 31, 2022, U.S. Education Department data shows. Only 12,527 borrowers had seen their debt forgiven through traditional rules, as of Oct. 31.

And the program is set to get more fixes effective July 1, 2023, including credit for partial payments and months spent in different types of deferment or forbearance, like military service, economic hardship or cancer treatment. 

Borrowers’ distress lifts with forgiveness

Up until that one-year mark before achieving forgiveness, borrowers report persistent financial and emotional stress, the SBPC survey found.  

Financial stress is, essentially, difficulty meeting financial obligations. Among those surveyed, financial stress stayed the same for borrowers with 61 or more payments left as it did for those with 13 to 24 payments left. 

The emotional toll is greater: Psychological distress was highest among those with 13 or more payments remaining. And among those with severe distress were higher risks of self-destructive behavior, including suicidal thoughts, non-prescription drug use and drinking alone. Suicidal thoughts were highest (18%) among borrowers with 37 to 48 payments remaining. 

Nearing and eventually achieving forgiveness seems to lift the dark clouds. 

On the financial front, borrowers who reach forgiveness report the least financial stress, have the highest average credit score — 766 — and about 80% own their own homes. They also experience the least psychological distress, as well as the lowest rates of non-prescription drug use, solo drinking and suicidal thoughts. 

What doesn’t change 

Surprisingly, achieving student loan forgiveness didn’t increase borrowers’ satisfaction with life or with their jobs, the survey found.

Only 42% said they were considering leaving their jobs post-forgiveness. “I think that that breaks apart any narrative that when these programs work correctly that individuals will automatically get loan forgiveness and leave their jobs,” says Collier, addressing critiques of Public Service Loan Forgiveness that argue forgiveness leads borrowers to stray from their often lower-paying professions once they get forgiveness.

There was also little discrepancy between the groups of borrowers in two markers of financial well-being: Personal savings and retirement savings.

But this could just be a sign of the times. More consumers than ever have savings, and federal student loan borrowers haven’t been making payments for years. It’s likely, says Collier, that borrowers are using the money they would spend on their loans to save and pay bills. 

More PSLF fixes are on the way 

Although the PSLF waiver has expired, a new one-time review of federal student loan payments will give borrowers a second chance to count past months toward the total needed for income-driven repayment forgiveness and PSLF.  

The one-time review is the result of Education Department findings that millions of borrowers were steered by their student loan servicers into forbearance — pausing payments, but allowing interest to collect — when they could have been enrolled in income-driven repayment plans. 

Borrowers can expect the one-time review to be reflected on their student loan accounts by July 2023. You don’t have to take any action if you’ve already submitted a PSLF application. If you haven’t done so, you must submit a combined employment certification/PSLF application in order to see past payments count under the one-time review.  

Collier’s research is ongoing, and student loan borrowers can participate in the Public Service Loan Forgiveness survey. The password is, naturally, “PSLF.”

Borrowers who previously received a rejection for PSLF can request a reconsideration online at studentaid.gov. If you’re not sure if you qualify, use the PSLF Help Tool.