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US President Joe Biden announces student loan relief on August 24, 2022, in the Roosevelt Room of … [+]
AFP via Getty Images
President Biden put forth an unprecedented student loan forgiveness plan last month that will cancel $10,000 in federal student loans (or up to $20,000 in some cases) for qualifying borrowers. But some questions remain about the timing of the relief.
Here’s what borrowers should know.
Biden’s Student Loan Forgiveness Plan
Biden’s proposal uses executive authority to enact sweeping student loan forgiveness. Borrowers can get up to $20,000 in student loan forgiveness if they received a Pell Grant (a federal financial grant for low-income families that does not have to be repaid); other borrowers who did not receive a Pell Grant can receive up to $10,000 in student loan forgiveness.
Government-held federal student loans, including graduate school loans and Parent PLUS loans, are eligible. Commercially-held FFEL-program loans are not automatically eligible, although the Education Department recently announced updates on potential FFEL loan eligibility. Private student loans do not qualify.
Borrowers must have earned less than $125,000 per year, or $250,000 per year if married, in either 2020 or 2021 to qualify.
Automatic Student Loan Forgiveness Under Biden’s Plan
The Education Department has indicated that around eight million federal student loan borrowers may receive student loan forgiveness automatically, without needing to submit a formal application. This includes borrowers who have already sent recent income data to the Education Department, either through submission of a FAFSA form, or a recent application or recertification for an income-driven repayment plan. The Education Department will be able to use this income data to award loan forgiveness automatically.
However, Education Department officials have not provided a clear timeline on when those borrowers should expect to receive the relief. And officials are encouraging borrowers to submit an application anyway, even if the Department may already have their income data on file.
Student Loan Forgiveness Application and Timing of Relief
The Biden administration has said that a formal student loan forgiveness application for the new initiative should be available on StudentAid.gov in early October. While few details have been released so far, the application is expected to be a fairly simple document where the borrower can attest to their income.
Education Department officials have said that they expect a four-to-six-week turnaround on applications — which is fairly fast when it comes to federal student loan paperwork.
“When you submit your application for debt relief, you’ll see a page online confirming your form was submitted,” says the Education Department in published guidance. “You’ll also get a confirmation email from us, so make sure we have your most current email address.”
When to Submit the Student Loan Forgiveness Application
Borrowers will have a little more than one year to apply for student loan forgiveness under the Biden plan once the application becomes available.
“You’ll have until Dec. 31, 2023, to submit your application for student loan debt relief,” says the Education Department.
However, top Education Department officials are encouraging borrowers to submit their applications by November 15, 2022, if they can. That way, the student loan forgiveness would be applied by the time the student loan payment pause ends on December 31, 2022.
The Education Department expects that 20 million borrowers will have their federal student loans completely eliminated under the initiative. Borrowers with remaining loan balances may be able to get their monthly payments recalculated based on re-amortizing their smaller balance.
Further Student Loan Reading
Student Loan Borrowers Should Write Down These Critical Dates For Loan Forgiveness And Repayment
How Biden’s New Income Based Plan May Work For Student Loan Borrowers, And When To Apply
Biden’s Student Loan Forgiveness Could Be Taxable In Some States
If You Went To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do