You’ve heard a lot about Biden’s plan to forgive up to $20,000 in student loans. Need to know some specifics? We’ve got you covered. Here’s a breakdown of what to know about student loan forgiveness.
Let’s get this out of the way – we aren’t talking about Public Service Loan Forgiveness.
If you have student loans, they’ve been in pandemic forbearance for years. Payments have been paused and will continue to be paused until December 31, 2022. The Biden admin has stated that this will be the final pause.
You don’t need to do anything to benefit from the pause. It’s automatic.
Who’s getting what?
Here’s the skinny: If you made less than $125,000 (individual) or $250,000 (household) in 2020 or 2021, you are eligible for at least $10,000 in federal student loan forgiveness. You might be eligible for more if you received a Pell Grant:
- If you received a Pell Grant, you are eligible for up to $20,000 in forgiveness.
- If you did not receive a Pell Grant, you are eligible for up to $10,000 in forgiveness.
Private loans are not eligible for forgiveness.
Why does it say “up to”?
You aren’t going to get an overpayment or credit if you owe less than the forgiven amount. If your loan balance is less than the forgiveness amount, then you’ll only receive that much relief.
- If you owe $5,000 and are eligible for $10,000, you’ll only receive $5,000 in forgiveness.
- If you owe $15,000 and are eligible for $20,000, you’ll only receive $15,000 in forgiveness.
How do I know if I got a Pell Grant?
You might be able to review your college financial award statements, but if it’s been more than a few years since you graduated, that information may not be available.
I recommend logging into studentaid.gov. They’ve updated their site recently and will display your loans and grants on your dashboard – no guesswork or hunting necessary.
What’s the timeline?
The application should go live this month, but there is no set date. We do know that the Biden administration has stated that they will not discharge any student loan debt before October 17, 2022.
- The administration has stated that forgiveness applications could be processed in as little as six weeks.
- The application will be online, but will eventually have a paper version. There is no launch date for physical applications.
- The admin recommends filing by mid-November so that your application is processed before the payment pause ends.
- Almost 8 million borrowers will receive the relief without applying because the Dept. of Education already has their income on file (Regardless, you should still apply).
Realistically, the Federal Student Aid website has been struggling to process the increased traffic as of late. There’s a high probability that the website will crash when the application goes live – think back to the Obamacare site disaster.
Watch for scams
We’re getting into the scammiest time of year with the holidays coming up, and con artists have already begun trying to find marks.
The federal government will not contact you to offer help for a fee. You never have to pay for help with federal student aid (you just have to pay it back). You can find more information about the debt relief announcement at the official student aid website.
If you want to stay up to date on what’s going on with your student loans check out Nika at @debtfreegonnabe for breaking updates!
Want to learn how to prepare for paying off any remaining loans?https://budgetgirl.com/how-to-prepare-now-for-student-loan-payments/