How to Apply for Joe Biden’s Student Loan Forgiveness Plan
On Wednesday, President Joe Biden announced that borrowers of federal student loans would soon be entitled to debt forgiveness of up to $20,000 per loan. For about 8 million debtors, debt relief will be automatic because the Department of Education presently has access to the necessary income data. The remaining 37 million borrowers, though, might be wondering if they are eligible for debt relief. What you need to know is as follows:
Who Is Eligible for Loan Forgiveness Under the New Plan?
All federal student loan debtors who meet the qualifying requirements listed below are eligible for debt cancellation. Under the Public Service Loan Cancellation (PSLF) program, borrowers who work for businesses, the armed forces, or federal, state, municipal, or tribal governments may be eligible for full loan forgiveness. After 120 full-time payments, the PSLF program wipes out the rest of the balance on federal student loans.
What Amount of Debt Is Being Forgiven?
For non-Pell Grant recipients, the Department of Education will forgive up to $10,000 in debt; for Pell Grant recipients, up to $20,000 in debt. Individual borrowers must have an annual income of less than $125,000, or $250,000 for married couples or households. Relief is only available up to the amount of the debtors’ outstanding balance. For instance, rather than receiving $20,000 in debt relief, if you are awarded a Pell Grant and have a $15,000 debt, you will only be given $15,000.
How Do I Request Loan Forgiveness?
The most important thing you can do to get debt relief is to make sure that the Department of Education and your loan servicer have accurate information about your income and how to reach you. Visit the Federal Student Aid website to find out who the loan servicer is if you are unsure. Soon, you will be able to enter your income information through a straightforward application if it is outdated or you are unsure if the Education Department has it. Before the suspension of federal student loan repayments ends on December 31, the application will be available. On the Department of Education’s subscription page, you can sign up to be told when the application is ready.
How would the plan affect upcoming loan repayments?
According to Biden’s proposal, the moratorium on student loan repayment will be extended until December 31, 2022. In January 2023, payments will start up again. The administration has also put out a regulation that would alter the current income-based repayment plan. Undergraduate loans would require borrowers to pay no more than 5% of their discretionary income rather than 10%, and debts of $12,000 or less would be forgiven after 10 years of payments rather than 20. One more problem is student loan debt.
The rule would stop borrowers’ balances from increasing as long as they make monthly payments by increasing the amount of income that is deemed non-discretionary and covering the unpaid monthly interest. Keep an eye out for new developments as the Department of Education reports that the administration is working to put the changes into place as soon as possible.