Follow These Steps To Get Your Student Loan Forgiveness

Follow These Steps To Get Your Student Loan Forgiveness

(Bloomberg) — When the Biden administration announced that qualifying borrowers can get up to $20,000 in forgiveness on federally held student loans, many of the 43 million Americans who were first eligible to pay off their debt were encouraged. Then came a barrage of questions.

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The Department of Education has provided some information on what borrowers can expect and will release more in the coming weeks.

For now, there are a few key dates: Online applications will open in early October and will take four to six weeks to process, the department said. That means borrowers should fill out forms by Nov. 15, according to a graphic posted by Education Secretary Miguel Cardona, to receive forgiveness by the time the pandemic-era payment freeze ends on Dec. 31. Applications close next year on 31 December, ie 2023. Separately, applications for a limited extension of the Public Service Loan Forgiveness program close on 31 October.

Here are some steps you can take to be prepared when applications become available:

1. Check if you are eligible.

If you made less than $125,000 in 2020 or 2021 — or if you’re married and both you and your spouse made less than $250,000 — and you took out federal student loans before June 30, 2022, you’ll qualify for forgiveness. The number to check is your adjusted gross income, or AGI, on tax returns from either of the past two years.

Pell Grant recipients will receive up to $20,000 in debt forgiveness, while holders of other types of federal loans will receive up to $10,000. All federally held student loans — including undergraduate loans, graduate loans, spousal loans and Parent PLUS and Graduate PLUS loans — are eligible.

Borrowers should note that forgiveness is not per-loan, but per-borrower – meaning if you took out multiple federal loans for your own education, or one loan for yourself and one Parent PLUS loan for a child, there is still a limit of $10,000 for your benefit or $20,000, said financial aid expert Mark Kantrowitz. Pell Grant recipients who took out one Pell Grant and other federal loans are still eligible for the full $20,000 in forgiveness, even if their grant was less than that amount.

2. Check if you need to fill out an application.

The vast majority of borrowers will have to complete an application to receive relief. However, approximately 8 million borrowers will be automatically enrolled in the program because the Department of Education already has access to their income information. That includes about 6 million current students who recently filled out the Free Application for Federal Student Aid and another 2 million borrowers who have income-based repayment plans and submitted income information for 2020 or 2021 Borrowers will be contacted automatically by the Department of Education. eligible to notify them.

If you are not in that group, you will need to complete an application.

3. Sign up for updates from the Department of Education, make sure your contact information is up to date with your loan servicer.

To ensure you are notified when the pardon application is live, sign up for updates on this Department of Education webpage by “NEW!! Federal Student Loan Updates” and entering your email address.

Next, confirm with your loan servicer that your contact information is up to date. If you’re not sure who your loan servicer is, you can check your personal dashboard at

4. Collect your 2020 and 2021 tax returns.

The purpose of the application is to gather income information to determine eligibility, so borrowers should have their 2020 and 2021 tax returns on hand to obtain their adjusted gross income.

5. Decide if you want to consolidate eligible private loans — and if you do, start right away.

Private loans, including Federal Family Education Loans (FFELs) that are government-backed but originally held by private companies, are not eligible for relief—but borrowers with FFEL loans can consolidate them into direct federal loans to be eligible. They can do that by going to the federal student aid website and filling out an application (available here), Kantrowitz said.

Applicants who want to consolidate their loans into direct loans in order to be eligible for forgiveness should start that process immediately, Kantrowitz said, as it can take 30 to 45 days for the consolidation to complete. be processed and the Department recommends that borrowers submit applications by November 15. .

6. Check if you are entitled to a refund on any payments you made during the pandemic.

Payments made during the pandemic hiatus can be refunded and then forgiven. In some cases, the department said, repayments will be automatic: Borrowers who successfully apply for and receive student loan forgiveness will automatically receive back the amount of their voluntary payments if those payments “provided balance below the maximum amount of debt relief you are eligible for. to get your loan but you haven’t paid it off in full,” according to the Department’s Frequently Asked Questions.

Other borrowers with Direct, FFEL or Perkins loans held by the Department of Education can still receive repayments and then have voluntary payments made during the pandemic forgiven — they just need to contact their loan servicers .

7. Weigh forgiveness and repayment alternatives.

The one-time loan forgiveness plan is not the only option available to debtors. Last October, the Department of Education announced a one-time extension of eligibility for public service loan forgiveness. Applications for that program are due on October 31 and are available on the student aid website.

The Department is also making a one-time adjustment to income-based repayment plans to address past counting and eligibility inaccuracies. This adjustment is automatic, so you don’t need to worry about a request. But only borrowers with direct loans are eligible, meaning those with FFEL loans who want to qualify need to consolidate those loans into a direct loan. More information is available on the student aid website.

The Department of Education has proposed a new rule for income-driven repayment that would cap monthly bills at 5% of discretionary income, instead of 10% — cutting payments in half for many borrowers. Those rules likely won’t be finalized until several months into 2023, according to student loan experts, but borrowers should take note of the potential change for planning purposes .

Borrowers in default on direct loans, FFEL loans and Perkins loans held by the Department of Education are eligible for the Fresh Start program, which was announced in April and lasts one year after the payment break ends on December 31. out to eligible borrowers “in the coming months” with instructions on how to access the program, according to the aid’s website.

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