| | | | | | It's been a whirlwind week for millions of student loan borrowers, myself included.
President Joe Biden finally followed through on his campaign promise to forgive student loan debt. He announced last week the cancellation of up to $10,000 in federal student loans and $20,000 for Pell Grant recipients. Borrowers who make less than $125,000 a year, or couples who make less than $250,000 annually can qualify for forgiveness, offering some relief to millions. Biden also extended the pause on federal student loan payments until January 2023 and announced a new plan to make monthly payments more affordable going forward.
As soon as the plan was announced, social media was flooded with questions about specific student loan situations and what this might mean for individuals and their families. There's also a lot of confusion and misinformation surrounding this loan forgiveness announcement.
I, for one, am curious to see if my mom who took out Parent PLUS loans to help me pay for college will also be eligible for relief. From what I've read so far on studentaid.gov, my mom is eligible — which means I could potentially get up to $20,000 of my loans forgiven instead of just $10,000.
We asked our readers last week what questions they have about Biden's new student loan relief, and I dug around for answers. We published an FAQ on student loan forgiveness on Friday, but since then, I've received over a dozen more questions from borrowers. Here are a handful of new questions I received in my inbox over the weekend, along with the best answers I could track down:
Will your loan be forgiven if you have not held a steady job and have not filed a tax return in either 2020 or 2021?
Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork, according to the IRS. However, it's legal to file a tax return showing zero income, and this might be a good idea to qualify for student loan forgiveness. The Department of Education is expected to set up an application process by the end of the year to verify borrowers' incomes and determine if they're eligible for forgiveness. Keep an eye out for guidance from your loan servicer.
Will your loan be forgiven if you have not held a steady job and have not filed a tax return in either 2020 or 2021?
Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork, according to the IRS. However, it's legal to file a tax return showing zero income, and this might be a good idea to qualify for student loan forgiveness. The Department of Education is expected to set up an application process by the end of the year to verify borrowers' incomes and determine if they're eligible for forgiveness. Keep an eye out for guidance from your loan servicer.
Do student loans in default qualify for forgiveness?
Yes, all defaulted borrowers are eligible for forgiveness. In early April, the U.S. Department of Education announced borrowers with defaulted federal student loans will return to repayment without any past due balance when the pause ends at the end of the year, giving anyone with defaulted loans a fresh start at repayment.
If individuals are planning on taking out a student loan next year, will those also qualify for forgiveness?
No, only federal undergraduate and graduate loans taken out before June 30, 2022, can qualify for forgiveness.
If my federal direct loans were consolidated, will those loans be forgiven?
Yes, federal direct loans that were consolidated are eligible for forgiveness.
Does it matter if you attended a public vs. private university?
No, it doesn't matter if you attended a public or private university. As long as you have federal student loans, you should be eligible. The U.S Department of Education said borrowers with commercially-owned FFEL loans (aka loans owned by a private company) can call their servicer and consolidate them into the Direct Loan Program to become eligible for forgiveness.
Is there a website or phone number I can go to apply for my student loan forgiveness? If so, is there a deadline?
Not yet. Secretary Miguel Cardona of the Department of Education tweeted out a timeline on Saturday for the application process. Borrowers can expect the application to be available by early October, according to Cardona. Once completed, borrowers can expect relief within 4-6 weeks if approved. If you fill out the application before Nov. 15, you will receive relief before payments resume in January. The Department of Education will keep the application open until the end of the year.
I want the FAQ below to be a resource for student loan borrowers to come to for up-to-date information on Biden's new student loan plan. If you have any questions, email me alex@nextadvisor.com so I can add your question to the FAQ.
| | | |  | | |  | | | | THE BOTTOM LINE | | Millions of Americans are in limbo waiting for information on how to take action on student debt relief. Make sure your contact information is updated with your loan servicer to receive up-to-date guidance on qualifying for student loan forgiveness. | More soon,
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