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WASHINGTON, DC August 24, 2022: US President Joe Biden delivers remarks regarding student loan … [+]
The Washington Post via Getty Images
The Biden administration is ramping up student loan forgiveness processing operations for two key initiatives. One — the Limited PSLF Waiver program — is ending in a matter of weeks. The other — Biden’s one-time debt cancellation initiative to wipe out up to $10,000 or $20,000 in student loans for most borrowers — is just getting started.
As millions of borrowers get ready to submit their student loan forgiveness applications, here’s what to expect.
Application Process for $10,000 or $20,000 in Student Loan Forgiveness Under Biden Initiative
Under Biden’s one-time debt cancellation initiative, millions of borrowers will be eligible for up to $20,000 in federal student loan forgiveness. Borrowers who received Pell Grants can get the maximum loan forgiveness amount, while borrowers who did not receive Pell Grants can still get up to $10,000 in debt cancellation. Eligibility is restricted to borrowers who earned less than $125,000 ($250,000 if married) in either 2020 or 2021.
The Education Department will be releasing a student loan forgiveness application in just a few weeks, and it should be available on StudentAid.gov. Borrowers will have until December 31, 2023 to apply. The application is expected to be a simple attestation of income. While the administration says some student loan forgiveness will be provided to borrowers automatically if the Education Department already has a borrower’s income data, all borrowers are encouraged to submit an application.
After submission of the application, administration officials expect a four-to-six-week turnaround time for processing. Then, the Education Department will apply the approved student loan forgiveness award in the following order: first to defaulted student loans held by the government, then to commercially-held FFEL loans in default, then to Department-held Direct and FFEL loans in good standing, and then to Department-held Perkins loans in good standing. For borrowers who have multiple federal student loans in the same category or program, the Education Department will first prioritize loans with the highest interest rate, and then will focus on loans that are unsubsidized.
Some borrowers may see a reduction in their monthly student loan payments after their student loan forgiveness has been applied to their balance, as the Education Department will be re-amortizing loan balances for borrowers in non-income-driven repayment plans.
Borrowers who made payments during the Covid-19 student loan pause will be entitled to automatic refunds if their payments reduced their balance below the maximum amount of student loan forgiveness they would have received under the Biden administration initiative if they had not made those voluntary payments. Other borrowers with government-held federal student loans can request refunds of voluntary payments made during the pandemic, although those refunds would not be automatic.
The Education Department will be conducting a small number of audits to verify borrowers’ income information as reported on their student loan forgiveness application.
Application Process For Borrowers Pursuing the Limited PSLF Waiver
The Biden administration enacted the Limited PSLF Waiver last year. The waiver temporarily alters several of the PSLF program’s strict rules to expand what qualifies as “credit” towards the 120 qualifying payments required for borrowers to obtain student loan forgiveness through Public Service Loan Forgiveness. Specifically, the Limited PSLF Waiver allows the Education Department to retroactively count certain past periods of payments, deferments, and forbearances that otherwise may have been rejected.
Borrowers with FFEL-program loans must consolidate those loans via the federal Direct consolidation loan program before October 31, 2022 to qualify. And Direct and FFEL loan borrowers who have not yet completed and submitted PSLF Employment Certification forms would need to do so by that date, as well.
Processing of Direct loan consolidation applications typically takes around thirty to sixty days after a borrower submits their application. To qualify for the Limited PSLF Waiver, FFEL borrowers must submit their Direct consolidation application (and their PSLF forms) before the end of October, but the Education Department does not have to complete processing by then.
Borrowers should select MOHELA — the Department of Education servicer contracted to handle the PSLF program — as their loan servicer. MOHELA is also the loan servicer that will process the PSLF Employment Certification forms. Existing Direct loan borrowers whose student loans are not serviced by MOHELA will have their loans transferred to MOHELA as the agency processes their PSLF forms.
On the PSLF Employment Certification form, borrowers can indicate whether they just want a count of qualifying PSLF payments, or that they think they have made at least the 120 qualifying payments required to obtain student loan forgiveness under the program. If so, borrowers can also request a forbearance while their forms are processed. Borrowers need to submit a separate employment certification form for each of their public service employers.
MOHELA may initially provide borrowers with a PSLF payment count that suggests they have made zero or very few qualifying payments. This is because MOHELA will apply the “original,” more restrictive PSLF rules during its initial review. The Department of Education is then supposed to do its own second-level review, applying the Limited PSLF Waiver and updating or adjusting borrowers’ PSLF counts accordingly. This process may take several months, and may not be completed until well after October 31.
Borrowers who believe that MOHELA or the Education Department have undercounted their qualifying PSLF payments under the Limited PSLF Waiver can submit an appeal or reconsideration request. “We recommend that you wait until the limited PSLF waiver period ends… before you submit a reconsideration request so that our evaluation of your request will be based on the newest information,” says the Education Department.
Resources for Borrowers Seeking Student Loan Forgiveness
- To learn more about the Biden administration’s one-time debt cancellation initiative, visit the Education Department’s dedicated website.
- To learn more about the Limited PSLF Waiver, visit the Education Department’s dedicated website.
- To explore or complete Direct loan consolidation, go here.
- To start the process of completing PSLF Employment Certification forms, use the Education Department’s PSLF Help Tool.
- To submit a PSLF reconsideration request, go here.
Further Student Loan Reading
134 Groups Urge Biden To Extend Expiring Student Loan Forgiveness Initiatives, While Top Officials Tell Borrowers To Apply Now
Student Loan Borrowers Should Write Down These Critical Dates For Loan Forgiveness And Repayment
Millions Of Student Loan Borrowers Will Get Refunds Of Payments Under Biden’s Loan Forgiveness Initiative
Biden’s Student Loan Forgiveness Could Be Taxable In Some States