Student Loan Forgiveness: All Your Questions Answered

Aaround 20 million Americans could see their student loan debt wiped out in just six weeks after the Biden administration launched the official request for debt cancellation on Monday.

Launching the app initiates the process of canceling up to $20,000 of student debt per borrower. Borrowers can apply for forgiveness any time before December 31, 2023.

“I stand by my commitment to provide student debt relief as borrowers recover from this economic crisis caused by the once-in-a-lifetime pandemic,” President Joe Biden said Monday.

But as Biden touts the completion of a campaign pledge weeks before the midterm elections, the program is currently facing several legal challenges from conservative groups and Republican-led states.

Here’s what to know about the app.

Who is eligible for loan forgiveness?

Individuals earning less than $125,000 per year, or married couples earning less than $250,000 per year, are eligible for loan forgiveness of up to $10,000. Borrowers who meet the same income requirements and who attended college on Pell Grants, designed to help low-income students, are eligible for a rebate of up to $20,000.

The income requirement is based on a person’s adjusted gross income, which is generally less than their total income. Adjusted gross income can be found on line 11 of IRS Form 1040 in their 2020 or 2021 federal income tax returns.

A September report from the Congressional Budget Office estimated that the plan could cost around $400 billion.

Who is not eligible for loan forgiveness?

About 45 million people owe a collective debt of $1.6 trillion in federal student loans. And more than 40 million borrowers are expected to receive debt relief through this program. Private student loans will not be forgiven by the program.

Borrowers who have taken out Parent PLUS loans, which are federal loans with higher interest rates and fees that parents can use to help their children pay for their education, can receive up to $10,000 in assistance. But they are not eligible for the additional $10,000 if only their child attended college on a Pell grant.

A change to the program in September also excluded about 800,000 borrowers and limited the amount of relief for many more. NPR reported.

The change affects borrowers who took out loans through the Federal Family Education Loan (FFEL) program, which ended in 2010 and had offered federal loans managed by private banks.

The Federal Student Aid website originally said borrowers with private federal student loans could receive debt relief by consolidating those loans into a Federal Direct Loan, a student loan held by the U.S. Department of Education. ‘education. He did not mention a deadline for this consolidation.

But the ministry later changed those guidelines. Borrowers with private federal student loans can no longer get debt relief unless they already applied for loan consolidation before September 29.

It’s frustrating for borrowers like Jennifer Newell Davies, who said she initially felt huge relief when Biden announced the loan forgiveness program. Davies, 36, said she owed just under $10,000 in federal student loans after earning a bachelor’s degree in journalism in 2009. She expected all to be forgiven.

But most of his federal debt consists of FFEL loans, which are now held by private banks and no longer included in Biden’s debt relief package. Davies, who lives in San Diego, started a petition re-include FFEL borrowers in student debt relief.

“We were sold these loans as federal loans,” she says. “I never asked for them to be private. I explicitly avoided private lending whenever possible.

The Department for Education says it is discussing the issue with private lenders and exploring “alternative avenues” to provide relief to those borrowers.

“We’re working on pathways there to support them,” Education Secretary Miguel Cardona said Monday when asked about people with private loans who aren’t eligible for the rebate. “But we are acting as quickly as possible to bring relief to as many people as possible.”

Where are the lawsuits against the program?

Several conservative groups and Republican-led states have filed lawsuits against the program, arguing that Biden lacks the authority to roll out the policy.

A federal judge heard arguments last week Republican-led states seeking an injunction to stop the debt cancellation plan. But he hasn’t made a decision yet.

“Republican members of Congress and Republican governors are trying to do everything they can to deny this aid, even to their own constituents,” Biden said Monday. “Their indignation is false and hypocritical.”

He acknowledged the ongoing lawsuits, but said he did not expect them to stop the debt relief program.

How to apply?

The app is simple and free, and can be found at: https://studentaid.gov/debt-relief/application

It asks borrowers to enter their name, social security number, date of birth, and contact information. Borrowers are not asked to upload documents, but must certify under penalty of perjury that they meet the program eligibility requirements. The Ministry of Education may request proof of income later.

“We will determine your eligibility and contact you if we need more information,” the application page reads. “Your loan manager will let you know when your relief has been processed.”

When should I apply?

The White House encourages borrowers to apply as soon as possible. About eight million borrowers applied over the weekend, after a beta version of the app went live, and another four million borrowers applied after the official launch on Monday, Biden said.

Cardona encouraged borrowers to complete the application by November 15 in order to receive relief before the pandemic-related pause on student loan repayment ends on December 31.

The Biden administration has argued that the president has the power to cancel student debt based on a 2003 law that allows the Department of Education to change student financial aid programs in the event of a “national emergency” – in this case, the COVID-19 pandemic.

But as other pandemic-related programs wind down and after Biden declares “the pandemic is over,” it could undermine the administration’s legal case.

How long will it take to see relief?

Cardoon previously said that borrowers should expect to see relief four to six weeks after completing the application.

In a recent court filing, the Department of Education said it would not cancel any loans until October 23.

Should I continue to repay my loans while waiting to find out if my debt has been forgiven?

When Biden announced the debt cancellation plan in August, he also extended the pandemic-related pause on federal student loan payments “one last time” through Dec. 31.

That means borrowers should expect to start repaying their student loans again in January. But many borrowers could see their debt eliminated by then, if they apply now.

Borrowers are encouraged to apply for forgiveness before November 15, so that they can receive debt relief before payments resume.

Could I be denied loan forgiveness?

Only people who meet the income requirements are eligible for debt cancellation under this program. The application requires borrowers to sign the form and affirm that they earned less than $125,000 individually or less than $250,000 as a married couple in 2020 or 2021.

The Department of Education may ask applicants for proof of income. If borrowers do not provide this proof by March 31, 2024 – or if they do not meet the eligible income requirements – they will not receive debt relief.

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Write to Katie Reilly at [email protected]

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