Some 40 million federal student loan borrowers are expected to have a big chunk — and in many cases everything — their canceled student debt.
President Joe Biden’s forgiveness plan, announced in late August, will forgive up to $10,000 in federal student loan debt for borrowers with annual incomes below $125,000. Borrowers who received a need-based Pell grant while in college can receive up to $20,000 back, as long as they meet the same income cap.
For most borrowers, this relief will not come automatically. Government officials have indicated that the vast majority of people will have to seek forgiveness one way or another.
The US Department of Education estimates it has enough information on nearly 8 million borrowers to automatically cancel their loans. Otherwise, officials have encouraged anyone who thinks they are eligible to apply when the application is live.
Here’s what we know so far about applying for student loan forgiveness.
How to Apply for Federal Student Loan Forgiveness
(Editor’s note: We’ll update this section when more details about the app are released.)
The Biden administration said the Department of Education will launch a website where borrowers can apply for forgiveness in early October. Borrowers can expect a “simple” and “short” self-attestation form, administration officials say.
Self-attestation forms are generally easy-to-fill forms where you promise the government, under penalty of perjury, that you qualify. This is a less burdensome process than the formal submission of documents proving your eligibility.
The basic qualifier in this case is income. The income limits — which are $125,000 for individuals and $250,000 for married couples or heads of households — are based on your adjusted gross income, or AGI, for the year 2021 or 2020. As long as your income was below the threshold in any of those years, you are eligible, officials say.
You can find and confirm your AGI on line 11 of the Form 1040i.e. your tax return.
Beyond that, we don’t yet know what the app will look like. What we do know is that you will need to seek forgiveness by December 31, 2023.
Assuming you want your loans paid off before payments restart in January, you’ll want to apply as soon as possible. Ministry of Education recommends borrowers seek forgiveness before November 15, as it could take four to six weeks for the forgiveness to reflect on loan balances.
Who is eligible for automatic relief
The Department of Education says it has enough information on about 8 million borrowers to automatically cancel their debt, pulling information from FAFSA and income-based repayment plans. If the department has your income information on file, they will let you know.
“If we determine that you are automatically eligible for debt relief, we will send you an email and text message (if you are signed up for SMS alerts). You don’t have to do anything. We will provide you with your information .to your loan officer to process your relief,” according to a FAQs at studentaid.gov.
If you do not hear from the Department of Education, you should apply for a waiver when the application is available.
What can you do now to prepare
While the finer details of the app are still being ironed out, there are a few steps you can take to prepare.
- Register for education department email alertswhich will let you know when pardon applications will be open.
- Make sure your contact information with your loan manager is up to date.
- Check your 2021 or 2020 tax returns to see if you meet the income limit.
- Login to your studentaid.gov account and note the type of federal loans you have in the “My Help” section. (FFEL, Perkins, or HEAL loans might require an additional step for forgiveness.)
- While logged into your student aid account in this same section, confirm that you have received a Pell Grant if you believe you are eligible for a rebate of up to $20,000.
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Refinance my loan
FFEL borrowers may need to consolidate
According to the last Data of the Department of Education.
Since these loans are held by private companies and not by the Ministry of Education, they are currently in a gray area (similar to the Perkins and HEAL loans discontinued). These loans have not been covered by the payment pause due to the pandemic, and the Ministry of Education has not yet decided whether these types of loans will be de facto eligible for the forgiveness.
If you have these loans, it does not mean that you cannot receive forgiveness. Rather, it means that you may need to go through an extra step. While the Department of Education makes a decision, you can take steps to ensure your loans qualify.
“In the meantime, borrowers with private federal student loans, such as the FFEL, Perkins, and HEAL programs, can take advantage of this relief by consolidating those loans into the Direct Lending Program,” according to the FAQs at studentaid.gov.
Know that consolidation is not the same as refinancing. (If you refinance your federal loans, they become private loans and will never be eligible for federal forgiveness.)
Consolidation is a completely free process offered by the federal government that allows you to combine multiple qualifying loans into one direct federally held loan with a fixed interest rate. The process usually takes 30-45 days. Consolidate your credits only via the process described on studentaid.gov.
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