Top Four Questions Borrowers Are Asking About Student Loan Forgiveness

Since the student loan forgiveness announcement from the Biden Administration on August 24, 2022, our phones have been busy!

The borrowers we have spoken with are frustrated with extremely long hold times when they call their servicers to get information or have found that their servicers have changed. As of today, we are also frustrated and are working hard to find out all the details about how the program will work.

To help, we have gathered the answers to the top four questions student loan borrowers have asked us about student loan forgiveness.

Top Four Student Loan Forgiveness Questions

  • To be eligible, your annual income must have fallen below the income threshold of $125,000 (for individuals) or $250,000 (for married couples or heads of households).

  • If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt cancellation.

  • If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt cancellation.

Your relief is capped at the amount of your outstanding debt.

For example: If you are eligible for $20,000 in debt relief but have a balance of $15,000 remaining, you will only receive $15,000 in relief.

Suppose you paid down your loan during the pandemic. In that case, Nerd Wallet says: “On September 13, the Education Department said a refund of the overpayment would be automatic for anyone who paid down their debt below the cancellation amount they qualify for. That is, if you qualify for $10,000 in cancellation but paid the balance down to $8,000 during the pandemic, your balance of $8,000 would be discharged and the remaining $2,000 would be refunded.”

  • Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.

  • If the U.S. Department of Education doesn’t have your income data, the Administration will launch a simple application scheduled to be available by early October.

  • If you want to be notified when the application opens, sign up on the Department of Education subscription page.

  • Once a borrower completes the application, they can expect relief within 4-6 weeks.

  • We encourage everyone who is eligible to apply, but there are 8 million people for whom the Department of Education has data and will get the relief automatically.

  • Borrowers are advised to apply before November 15 to receive relief before the payment pause expires on December 31, 2022.

  • The Department of Education will continue to process applications as they are received, even after the pause expires on December 31, 2022.

Choosing a Post-Pandemic Repayment Strategy

Feeling hopeful about loan forgiveness is comforting. If you will have a balance remaining after your loan forgiveness is applied, we recommend the best strategy is to file NOW for an Income-Driven Repayment Plan so that you can be ready to resume payments when it happens. Your monthly payment could be as low as zero dollars per month depending on your income and household size. Lastly, keep in mind that the Income-Driven Repayment Plans do have the benefit of potential student loan forgiveness.

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