How to Get Student Loan Forgiveness: A Step-by-Step Guide

INDONESIAKININEWS.COM -  When President Joe Biden campaigned to sit in the Oval Office, he made an important promise: He would cancel studen...

INDONESIAKININEWS.COM - When President Joe Biden campaigned to sit in the Oval Office, he made an important promise: He would cancel student loan debt up to at least $10,000.

After more than a year and a half, Biden finally came through on that big announcement. The US Department of Education (DOE) will cancel federally held debt up to $10,000 for non-Pell Grant recipients and up to $20,000 for those with a Pell Grant. The move stands to affect as many as 43 million borrowers and cancel student loan debt for almost 20 million, according to a fact sheet from the White House.

But there is an important catch: Many borrowers don’t simply qualify for relief and get it; they have to apply for debt forgiveness through a process outlined by the DOE's Federal Student Aid office. This mostly involves submitting an application including income data to the federal government so officials can confirm they qualify.

The application is set to launch in early October. Although the official deadline is more than a year away, December 31, 2023, the office advises applicants to apply by November 15 to receive forgiveness by December 31 of this year, when the student loan repayment pause will end.

Who qualifies for student loan forgiveness?

Eligibility is the first important point here, because not all borrowers with student loan debt qualify. For starters, forgiveness applies only to federally held student loans, so private loans are not included. And Biden’s plan specifically exempts from receiving loan forgiveness what the White House calls the top 5% of incomes in the United States. That means if you make more than $125,000 individually or $250,000 for a married couple, you do not qualify for this program. In fact, the vast majority of federal funds for student loan relief — almost 90% — are going to borrowers who are no longer in school and earning less than $75,000 a year, according to the Department of Education.

If your income has changed and you’re wondering which tax year you must refer to, tax experts say borrowers can choose from their 2021 or 2020 tax returns, per U.S. News and World Report. When calculating that threshold number, it is the adjusted gross income — or income minus certain adjustments — to take into account, according to Bloomberg.

There’s even better news here: If you made payments on your student loan during the payment pause, which started March 13, 2020, you can qualify for a refund. First, contact your loan servicer for a refund. After the money is refunded to you and reapplied to your balance, you can then apply for student loan forgiveness for the amount you owed before you made those payments during the pause.

It’s important to note that current students — not just those who have finished college — can also apply for student loan forgiveness. Their eligible income, however, will be based on their parents’ annual earnings rather than their own. Borrowers who have debt but did not complete their degree also qualify.

In an effort to further reach borrowers from low-income households, the federal government will offer loan forgiveness of up to $20,000 for recipients of a Pell Grant. These grants are given to students “with exceptional financial need” and do not generally need to be repaid. Still, these funds are not nearly enough to pay for a student’s entire college career; they cover only about a third of the cost of college, meaning many Pell Grant recipients take out additional student loans to meet expenses.

Targeting Pell Grant recipients is an effort to address economic and racial barriers to college. Borrowers of color are more likely than their peers to receive these grants. Black borrowers, in particular, are twice as likely as white borrowers to have received a Pell Grant, according to the White House. And almost every Pell Grant recipient came from a family that made less than $60,000 a year. In total, about 27 million borrowers could receive up to $20,000 in student loan forgiveness.

How do I apply for student loan forgiveness?

The process is fairly straightforward, with one important exception: The Department of Education has not yet posted the application, so borrowers will have to watch for updates.
  1. First, not every borrower will have to fill out an application. In fact, almost 8 million borrowers already have their income data available to the DOE and may receive debt forgiveness automatically, according to the Federal Student Aid office.
  2. For those whose income data is not yet available, the easiest way to learn when the application is posted is to sign up for the DOE's federal student loan borrower updates at this link, and click the top option. You should receive an email when the application goes live in early October.
  3. Before the application is posted, it’s best to gather relevant paperwork. Although the DOE has not specified what that will include, it will likely entail prior tax returns and any other documents that show income data.
  4. When the application is available, borrowers can apply by November 15 to get relief by December 31 of this year. The office estimates that relief will take between four and six weeks.
  5. Applications are still valid after the federal student loan repayment pause ends on December 31, 2022, but there is a deadline to apply: Dec 31, 2023.
How long will it take to receive student debt relief?

The Department of Education has offered little information about how long the application itself will take. The best hint is a line in the White House’s fact sheet, which indicates that it will be a “simple application process.”

The DOE says that borrowers “can expect relief” within four to six weeks of the application submission. Although debt forgiveness is generally considered taxable income, Biden’s plan does not allow federal student loan repayment to be subject to federal income tax, per U.S. News. That said, at least six states (Arkansas, Massachusetts, Minnesota, Mississippi, North Carolina, and Wisconsin) could require borrowers to pay state income tax on their debt forgiveness, according to tax experts who spoke to the outlet, so it’s important to prepare now for that possibility.

Source: teenvogue


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IndonesiaKiniNews.com: How to Get Student Loan Forgiveness: A Step-by-Step Guide
How to Get Student Loan Forgiveness: A Step-by-Step Guide
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