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Student Loans Forgiveness Process (Eligibility, Application and Approval Method)

On August 24, the White House revealed President Biden’s student loan forgiveness program, however, there were many unclear specifics and important questions that went unanswered.



Several aspects of the proposal have been made clear by the U.S. Department of Education, including when applications would be accepted, which loans are eligible, and how relief will be applied.


Who Are Eligible For Debt Forgiveness?

The U.S. Department of Education will provide up to $20,000 in canceled federal student loan debt if the borrower is a Pell Grant beneficiary and up to $10,000 if they hold non-Pell Grant federal student loan debt to any borrower who earned less than an adjusted gross income of $125,000 ($250,000 for married couples filing jointly or head of household) in either 2020 or 2021.
Your AGI differs from your total gross income, which is the sum of all of your annual earnings before any taxes or deductions. The IRS defines AGI as your net taxable income, which includes qualifying adjustments or deductions like student loan interest and retirement account contributions. On your 1040 form, on Line 11, you can see your AGI for your 2020 or 2021 tax return.




When Can I Submit a Student Loan Forgiveness Application?

The application “will be available no later than when the hold on federal student loan repayments concludes at the end of the year,” according to the original August 24 White House news release. The Federal Student Aid website has been updated to state that the application forms for debt forgiveness will be made accessible online during the first week of October, and borrowers will have until December 31, 2023, to submit their requests. The Department of Education will automatically provide relief to borrowers whose confirmed income information is on file with them.
On the department’s subscription page, the Education Department urges borrowers to sign up for regular updates about the forgiveness plan. Additionally, it recommends that once the application is made accessible, you should submit your application by Nov. 15 in order to get your relief funds before the payment pause expires on Dec. 31. 4-6 weeks after applying, you ought to get your loan relief.


What Loans Are Eligible for Forgiveness of Debt?

You may have heard that while Biden’s loan forgiveness plan exempts private student loans from forgiveness, it only applies to federal student loans. That is generally accurate, but the Education Department’s change makes certain murky areas clearer.
The majority of Department of Education-owned federal student loans with an outstanding balance as of June 30 are eligible for loan relief, according to the Federal Student Aid website. In addition, consolidation loans may be used if all of the underlying consolidated loans were disbursed on or before June 30. These include graduate and undergraduate Direct Loans, Parent PLUS and Grad PLUS loans, and consolidation loans.


A few Federal Family Education Loans and Perkins Loans owned by the Department of Education are also eligible, as are defaulted loans under its management, including Stafford Loans with commercial servicing that are subsidized or unsubsidized.
Debt forgiveness is not an option for non-federal private student debts. This covers any federal loans that have been converted into private loans. The Department of Education is debating whether to extend eligibility to privately held federal student loans (such as FFEL or Perkins loans not held by ED), but borrowers with these types of loans can consolidate them into the Direct Loan Program to benefit from the debt relief options under Biden’s plan.


In what ways will student loan relief be implemented?

The Department of Education will process forgiveness on bigger loan balances using a “waterfall” method, according to Adam M. Minsky of Forbes. The following is the order in which the assistance will be granted to borrowers having numerous loans:
Defaulted commercial FFEL Program loans, non-defaulted Direct Loan Program loans, and FFEL Program loans held by the department, as well as Perkins Loans owned by the department.


The Department of Education will provide relief similar to this for borrowers who have several loans in the same loan program (i.e., multiple Direct student loans):
Loans having the highest statutory interest rates will be given first consideration.
• If the interest rate and subsidy status are the same, the department will apply the loan forgiveness to the most recent loan, and if interest rates are the same, unsubsidized loans will be forgiven before subsidized loans.
• The department will apply the loan forgiveness to the loan with the lowest total principal and interest sum if the interest rate, subsidy status, and disbursement date are all the same.


Will the Balance of My Outstanding Loan Be Re-Amortized?

After receiving debt relief, if you still have student loan debt, you might benefit from re-amortizing your loan, which could lower your monthly loan payments by hundreds of dollars, according to Forbes.
After debt relief has been established, the Department of Education “will recalculate your monthly payment based on your new balance, potentially reducing your monthly payment,” according to the department. Your new payment amount will be communicated to you by your loan servicer.

43 million debtors could benefit from the president’s proposal, with around 20 million having their whole balance forgiven. The plan’s detractors claim that wealthy Americans would gain disproportionately from it.

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