President Joe Biden said on Wednesday that federal student loan debtors will soon be eligible for debt forgiveness of up to $20,000 per loan. Because appropriate income data is currently available to the Department of Education, debt relief will be automatic for roughly 8 million debtors.
However, the remaining 37 million borrowers may be asking how they might qualify for debt relief. Here’s what you should know.
Who Is Eligible for Loan Forgiveness Under the New Plan?
Debt cancellation is available to all federal student loan borrowers who meet the eligibility criteria specified below.
Borrowers who work for organizations, the military, or federal, state, tribal, or local governments may be eligible for full loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. After 120 full-time payments, the PSLF program forgives the remaining balance on federal student loans.
How Much Debt Will Be Forgiven?
The Department of Education will forgive up to $10,000 in debt for non-Pell Grant holders and up to $20,000 for debtors who received a Pell Grant as an undergraduate. Borrowers are eligible if their individual income is less than $125,000, or $250,000 if they are married couples or households.
The amount of relief is limited to the amount of the debtors’ outstanding debt. For example, if you obtain a Pell Grant and have $15,000 in debt, you will receive $15,000 in debt relief rather than $20,000.
How Do I Request Loan Forgiveness?
Making sure your contact information is up to date with your loan servicer and your income data is up to date with the Department of Education is the most crucial step toward debt relief eligibility. If you don’t know who your loan servicer is, go to the Federal Student Aid website.
If your income information with the Education Department is out of date, or you are unsure if they have it, you will soon be able to input it through a simple application.
The application will be accessible before the conclusion of the federal student loan repayment suspension on December 31.
On the Department of Education’s subscription page, you can sign up to be alerted when the application is open.
What Impact Will the Plan Have on Future Loan Repayments?
Biden’s plan involves extending the student debt repayment moratorium until December 31, 2022. Repayments will resume in January 2023.
In addition, the administration has proposed a rule that would change the present income-based repayment schedule. Borrowers would pay no more than 5% of their discretionary income on undergraduate loans instead of 10%, and loan amounts of $12,000 or less would be canceled after 10 years instead of 20 years of payments. Graduate debt is another issue.
The rule would also increase the amount of income considered non-discretionary and cover borrowers’ unpaid monthly interest, preventing borrowers’ balances from growing as long as they make monthly payments.
According to the Department of Education, the government is striving to implement the adjustments as soon as possible, so stay tuned for additional developments.