Joe Biden promised each borrower $10,000 in loan forgiveness during his presidential campaign. As of right now, according to President Biden, the government will forgive up to $20,000 in federal student loan debt for each eligible borrower. The extension of the federal student loan payment moratorium was also included in the announcement. Here is an overview of recent announcements and other events. As new information comes to light, this article will be updated.
Which loan of mine will be paid off first?
When forgiveness is implemented, qualified loans are given the following priority:
Unpaid loans: According to Kantrowitz, any loans that you may have defaulted on will be the first to receive forgiveness.
- Highest rate of interest: Then, he added, the relief would be focused on your debts with the highest interest rates.
- Type of loan: Loans that aren’t subsidized will be cancelled before loans that are.
- They will apply it to the most recent loan “if everything is the same, which is improbable,” according to Kantrowitz. They will apply it to the loans with the lowest balances if that doesn’t distinguish.
How much of my debt is forgiven?
Most federal student loan borrowers will be eligible for some forgiveness, according to President Joe Biden’s announcement in August. The amount of forgiveness will range from $10,000 to $20,000 depending on whether the borrower received a Pell Grant, a type of financial aid available to low-income undergraduate students. How can you tell if you have one?
You will only be cleared for the amount you are qualified for if your outstanding student loan balance is less. However, you are entitled to a reimbursement for any payments you paid during the epidemic.
The reduction is not available to borrowers who make more than $125,000 annually, married couples, or heads of households who make more than $250,000.
Application for Pardon: Steps
If you think you qualify, get in touch with your loan servicer. If you have a Perkins Loan, get in touch with the institution that issued it or the loan servicer the institution has chosen.
Loan Repayments During the Review of the Application
You might need to make payments while your application is being reviewed, depending on the sort of forgiveness, cancellation, or discharge you’re looking for. If you want to know if you have to keep paying during the application review time, check with your loan servicer.
My application was successful
You are no longer required to make loan installments if you are granted loan cancellation, forgiveness, or discharge in full. You are responsible for paying back the remaining amount of your loan if you are only eligible for partial forgiveness, cancellation, or discharge.
In addition to receiving a refund of some or all of your loan payments, depending on the type of loan discharge you are eligible for, you may also have any negative information about your loan default or delinquency removed from your credit report. The discharge may remove the default status if the loan was in default. You could regain eligibility for federal student aid if you don’t have any other defaulted debts.
My request was turned down
You will still be accountable for repaying your loan in accordance with the provisions of the promissory note you signed if your application is rejected. If you have a Direct Loan or FFEL Program loan, talk to your loan servicer about your choices for repayment. Consider your choices for repayment.
To learn how to start repaying your loan and your options for getting out of default if your loan is in default, visit Getting Out of Default.
For further information if you think your application was incorrectly rejected, get in touch with your loan servicer.
What about loans from FFEL, Perkins, and HEAL?
In this area, things become more hazy. The Federal Family Education Loan, Federal Perkins Loan, and Health Education Assistance Loan programs all provided loans that were issued by educational institutions or private lenders but were backed by the American government. Some FFEL and Perkins loans are handled by the Department of Education, but others (as well as all HEALs) are held by other parties.
The relief only extended to direct loans, FFEL and Perkins loans held by the government as well as direct FFEL, Perkins, and HEALs in default when the federal government froze loan payments and interest fees during the pandemic. According to Abby Shafroth, director of the student loan borrower relief project at the National Consumer Law Center, any loan whose payments and interest have been suspended is eligible for the $10,000 to $20,000 in forgiveness.