Student Loan Forgiveness Update – Eligibility Requirements and How to apply?

The Biden administration outlined plans for sweeping student debt relief. Borrowers who meet income thresholds will be eligible for cancellation of up to $20,000 in debt. 

Student Loan Forgiveness Update

The Biden administration has unveiled a revised student loan forgiveness proposal that aims to provide relief to millions of Americans burdened by federal education debt.

Borrowers who make under $120,000 individually or $240,000 as a household and are enrolled in income-driven repayment (IDR) plans will have their entire unpaid interest balance forgiven, regardless of their original loan amount.

Those who have been repaying their undergraduate loans for at least 20 years or their graduate loans for 25 years will have their remaining balances completely erased.

Student Loan Forgiveness Key Updates

There are two key updates on student loan forgiveness as of 2024:

New Income-Based Debt Relief Plans:

  • The biggest news is the Biden administration’s proposed income-based relief program. Announced in early April, this plan aims to offer significant student loan forgiveness to borrowers based on their income.
  • Eligible borrowers could see up to $20,000 in debt canceled, with Pell Grant recipients potentially receiving even more relief (up to $20,000 additional).
  • However, crucial details like specific income thresholds and the official application process are still being finalized. The Department of Education is expected to release proposed rules in the coming months, with potential forgiveness starting this fall.

Progress on Existing Programs:

  • While the new income-based plan is under development, there’s been progress on existing forgiveness programs.
  • In late April, the Department of Education announced additional loan forgiveness approvals for both Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). 
  • This means many borrowers enrolled in these programs have received some relief.

Eligibility Requirements for Student Loan Forgiveness 

There are two main federal student loan forgiveness programs in the United States: Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) forgiveness. Each program has its eligibility requirements. 

Public Service Loan Forgiveness (PSLF):

  • Loan Type: Only applies to federal Direct Loans or federal loans consolidated into a Direct Loan.
  • Employment: Requires working full-time for a qualifying employer. This includes federal, state, local, or tribal government agencies and certain non-profit organizations. (https://studentaid.gov/pslf/employer-search)
  • Teachers who work full-time for 5 consecutive years in low-income schools can qualify for up to $17,500 in federal student loan forgiveness.
  • Repayment Plan: Payments must be made under a qualifying repayment plan, such as the standard 10-year repayment plan or an income-driven repayment plan.
  • Payments: You need to make 120 qualifying monthly payments. Recent changes offer credit for some periods that previously didn’t count, including deferment, forbearance, and repayment on any federal loan (not just Direct Loans). 
  • You can use the PSLF Help Tool to see if your past payments qualify. (https://studentaid.gov/pslf/)

Income-Driven Repayment (IDR) Forgiveness:

  • Loan Type: This applies to federal Direct Loans and some federal loans that have been consolidated into a Direct Loan.
  • Repayment Plan: Requires enrollment in an income-driven repayment plan for a specific period, typically 20 or 25 years, depending on the plan. Recent changes may give credit for some periods that previously didn’t count.

Applying for Student Loan Forgiveness 

The application process for student loan forgiveness depends on the specific program you’re applying for:

Public Service Loan Forgiveness (PSLF):

  • Employment Verification: Use the PSLF Help Tool (https://studentaid.gov/help-center/answers/article/pslf-help-tool) to submit a PSLF & Temporary Expanded PSLF (TEPSLF) Certification & Application form. 
  • You’ll need to get this form signed by your employer to verify your employment qualifications. Ideally, submit this form annually and whenever you change employers.
  • Track Payments: Keep track of your payments to ensure they qualify. You can use the Federal Student Aid website (https://studentaid.gov/) to monitor your payment history.
  • Final Application: Once you’ve made 120 qualifying monthly payments, submit a final PSLF form through your loan servicer, MOHELA. This form will again require employer certification.

Income-Driven Repayment (IDR) Forgiveness:

  • Enrol in IDR Plan: Ensure you’re enrolled in a qualifying IDR plan like PAYE or ICR. You can manage your plan on the Department of Education’s website (https://studentaid.gov/).
  • Maintain Enrollment: Make sure to stay enrolled in your IDR plan and continue making your monthly payments on time. 
  • Recent changes may allow you to receive credit for past periods of deferment or forbearance, so check with your servicer if applicable.
  • Automatic Forgiveness: After 20 or 25 years of qualifying payments depending on your plan, any remaining loan balance should be forgiven automatically. 
  • However, it’s recommended to contact your servicer to confirm the forgiveness process has been initiated.

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