In August, President Biden announced a student loan debt forgiveness plan that would cancel $10,000 in debt for a borrower earning $125,000 or less, and $20,000 for those with Pell Grants.
Nearly 8 million student loan borrowers may be eligible to receive forgiveness automatically because their income information is already available to the U.S. Department of Education. Others whose data is not on file will need to complete an application, which should be available by early October 2022. Here are some important questions and answers regarding student loan forgiveness. We will also give you tips so you don’t miss important student loan forgiveness updates.
Who is eligible for student loan debt forgiveness?
According to The White House fact sheet on student debt loan forgiveness, if all borrowers claim the relief they are entitled to, student loan forgiveness will be provided to up to 43 million borrowers. This includes canceling the full remaining balance for roughly 20 million borrowers.
Income limits apply for student loan forgiveness eligibility. An individual’s income must be less than $125,000 or less than $250,000 for married couples. For eligibility, earnings from your income tax return for 2020 or 2021 will need to be submitted to qualify. Current students with loans are also eligible for debt relief. You must have taken out your federal student loan prior to June 30, 2022, to qualify for forgiveness. Borrowers who are dependent students will be eligible for relief based on their parent’s income, rather than their own income.
The amount of debt forgiveness will depend on whether or not the borrower received a Pell Grant. Those who did may receive up to $20,000 in debt cancellation. Others who meet income requirements may receive up to $10,000 in debt cancellation. Finally, borrowers should note that forgiveness is not per loan, but rather per borrower.
What type of student loans qualify for forgiveness?
Nearly every type of federal student loan qualifies for the new forgiveness program. This includes direct subsidized or unsubsidized loans and graduate or parent PLUS loans.
How do I apply for student loan forgiveness and get updates?
If the U.S. Department of Education already has your income data, your debt will be forgiven automatically. If they do not have it, you will need to complete an online application. The vast majority of borrowers will need to fill out the application to receive relief.
First, check your tax return to verify that you are within the income thresholds for loan forgiveness. If you are unsure if you received a Pell Grant, log into your Federal Student Aid (FAFSA) account with your FSA ID. The portal should contain your student aid report, which will list any Pell Grants. Tap to learn more or log into your Federal Student Aid account.
The application for student loan forgiveness will be available online in early October. Sign up for updates on the student loan forgiveness application on the U.S. Department of Education website. Check the box marked Federal Student Loan Borrower Updates. This will ensure you don’t miss important student loan forgiveness updates and get a heads-up regarding the application launch date.
Once the application goes live and is completed, loan cancellation can be expected in approximately four to six weeks. It is recommended that applications be submitted in October or early November, so the forgiveness occurs before January when student loan repayments are restarted. Borrowers with balances greater than the amount forgiven will resume payments in January as well. To be specific, the pause period on federal student loans ends on December 31, 2022.
Apply early for student loan forgiveness
While borrowers will have until December 31, 2023, to apply for the student loan forgiveness initiative, the Department of Education is encouraging borrowers to submit their application before November 15, 2022. To sum it up, borrowers should aim to complete the application early so the loan forgiveness is applied to their balance before the end of the student loan pause on December 31, 2022.
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