Well, it’s the moment borrowers have been waiting for: The student loan forgiveness application is live.
Not that long ago, President Biden announced his plan to cancel up to $20,000 of federal student loan debt. It wasn’t clear if he actually had the power to forgive student loans—and there’s even been some legal challenges to his plan. But the U.S. Department of Education just dropped the application for federal student loan debt relief, so it looks like it’s really happening.
While the application itself only takes about five minutes to fill out, it’s still a smart idea to understand what you’re signing up for before you hand over your personal information. Let’s break down everything you need to know about the student loan forgiveness application (and what to watch out for), so you can get the relief you need.
- What Is Federal Student Loan Debt Relief?
- Which Loans Are Eligible for Forgiveness?
- How to Apply for Federal Student Loan Debt Relief
- Watch Out for Scammers
- Student Loan Refunds
- What to Do if You’ll Still Have Student Loans After Debt Relief
What Is Federal Student Loan Debt Relief?
Federal student loan debt relief (aka President Biden’s student loan forgiveness plan) is a one-time forgiveness plan for current borrowers with federal student loan debt. And by one-time we mean, don’t bank on this kind of forgiveness happening again.
How much relief do people get? Well, you can have up to $10,000 of federal student loan debt forgiven, as long as you make less than $125,000 a year (or $250,000 for married couples). And you can get an additional $10,000 forgiven (so, $20,000 total) if you also received a Pell Grant in college.
Which Loans Are Eligible for Forgiveness?
- William D. Ford Federal Direct Loans
- Federal Family Education Loans owned by the Education Department
- Federal Perkins Loans owned by the Education Department
- Subsidized and Unsubsidized Stafford Loans
- Parent PLUS Loans owned by the Education Department
- Grad PLUS Loans owned by the Education Department
Basically, any student loans affected by the payment pause over the last few years are eligible to be forgiven under this plan. But keep in mind, this forgiveness only applies to loans given out before June 30, 2022.
Are consolidated loans eligible?
Consolidation loans are eligible for forgiveness as long as the loans consolidated were owned by the Education Department. Even consolidation loans made up of FFEL or Perkins Loans not owned by the Education Department are eligible if you applied for the consolidation before September 29, 2022.
Are defaulted loans eligible?
Yes, defaulted federal student loans still qualify for forgiveness. And if you’ll continue to have defaulted student loans after this debt relief goes through, there’s some additional good news for you: Biden introduced a “Fresh Start” initiative this year that will allow borrowers to be considered in good standing once payments start back in January 2023. We don’t have all the details yet about how to take advantage of this program, but it should give you some more time to get caught up on your remaining loans.
Are private loans eligible?
Nope. Sorry, but this debt relief is only for federal student loans. Private student loan forgiveness is a whole other kit and caboodle. And if you’ve consolidated a federal student loan into a private loan, that consolidated loan isn’t eligible either.
How to Apply for Federal Student Loan Debt Relief
So, now that you know the basics of this forgiveness plan, let’s talk about the application itself. First off, here are some things you should know about the application process:
- You have until December 31, 2023, to apply.
- The application is available in both English and Spanish.
- You don’t need to log into your student loan account to apply.
- Make sure you actually qualify for student debt relief before you apply—otherwise, you could get into some serious hot water for lying on the application.
- Parents with Parent PLUS Loans or their own student loans need to apply separately from their child.
- If you received a Pell Grant in college, the Education Department should have a record of it (so no need to go digging for proof just yet).
- You don’t need to provide any documents to apply. But you may be asked to show proof of income when your application is being reviewed.
- If you completed the Free Application for Federal Student Aid (FAFSA) for the 2022–23 school year or if you’re currently on an income-driven repayment plan based on your 2020 or 2021 income, you may not have to apply for debt relief—but you should get an email from the Education Department if that’s the case. Otherwise, most borrowers will need to apply if they want to receive forgiveness.
Okay, with those facts out of the way, here are the steps to apply for federal student loan debt relief:
1. Fill out the application.
You can fill out the application on the Federal Student Aid website. (Make sure it’s the official studentaid.gov website!) Once you’ve submitted your application, you should get an email confirmation that it went through.
2. Your application will be reviewed.
We’re not 100% sure on the timeline for this (there are a lot of applications to get through, after all). But the Education Department will contact you if they need any more information or any documents to show proof of income.
3. You’ll be notified when your application is approved.
It’s just a waiting game at this point. Patience, grasshopper.
4. Your loan servicer will apply the relief directly to your account.
Once your application is approved, your loan servicer will handle the rest. Again, the timeline for this depends on your servicer.
What if I can’t apply online?
If you can’t or don’t want to fill out the application online, there’s also a paper version of the application coming soon.
Will I be taxed on this forgiveness?
You won’t be taxed on the federal level, but some states have decided to tax student loan debt relief. Check to see how your state will handle student loan forgiveness.
What if I don’t want to receive forgiveness?
If you don’t want to have your loans forgiven (maybe because you don’t want to be taxed on the state level), you should contact your loan servicer and let them know.
Watch Out for Scammers
Now that the forgiveness application is live, you can bet there are plenty of lowlifes out there trying to take advantage of borrowers. Their mission: Steal your personal information. But you’re not going to let that happen, right?
The more aware you are, the safer your info is. Here are some things to look out for when you’re applying for student loan debt relief:
- Only trust .gov websites and email accounts. (Check those URLs, people!) When in doubt, studentaid.gov is your source of truth. And only open emails from these senders: email@example.com, firstname.lastname@example.org or email@example.com.
- You don’t have to pay for student loan forgiveness. Period. If someone says you do or tries to charge you a fee, that’s a huge red flag.
- You don’t have to upload financial documents when you apply. This one is sneaky, but scammers will try to get you to attach or send them personal documents. While the Education Department might ask you to show proof of income later on, you don’t have to upload anything when you first apply.
- Don’t give out account passwords. No one legit will ask for your password.
- Be careful who you give your personal information to. Just so you know, the official application will ask for your Social Security number. But other than that, guard that number with your life to prevent identity theft.
Student Loan Refunds
If you qualify to have more student loan debt forgiven than your current balance and you made payments on your student loans during the payment pause (since March 13, 2020), you’ll get a refund for the amount you paid during that time. This doesn’t apply to loans consolidated after March 13, 2020, though.
What does that mean? Well, let’s say you qualify to have $10,000 of federal student loan debt forgiven under Biden’s plan, but you only owe $8,000. If you paid $2,000 during the payment pause, you’ll be refunded that $2,000 once student loan debt relief kicks in. This should happen automatically, but contact your loan servicer if you have any questions.
What to Do if You’ll Still Have Student Loans After Debt Relief
Watch your monthly payment.
When your student loan balance goes down, don’t be surprised if your loan servicer gives you a lower monthly payment. That may sound nice now, but all that really does is drag out the length of your loan and make you pay way more in interest. (Hey, your loan servicer needs to make up the loss somehow.) But you want to speed up your payoff progress, not slow it down.
Your best bet is to pay off your student loans as fast as you can using the debt snowball method. Basically, you list all your debts (student loans, car loans, credit card debt) from smallest to largest balance (regardless of interest rate). Then, you throw everything you can at that smallest debt while you make minimum payments on the rest. Once that smallest debt is gone, you move on to the next-smallest and attack it the same way. It sounds aggressive because it is. That’s the only way you can get student loan debt out of your life for good!
Get on a budget (or adjust it).
If you haven’t been paying on your student loans since March 2020, now’s the time to get ready for that monthly payment again. Because once January 1 hits, you don’t want to be caught off guard and immediately default on your loans. This is when a budget comes in real handy.
Go ahead and set up your budget today (as in, right now)—and be sure to include your student loan payment. When you list out all your income and expenses, you’ll also see exactly how much money you can throw at your debt snowball. And if you’re in the red or don’t have a lot of margin right now, it’s time to do some adjusting, cut some spending, or even make some extra money.
That student loan payment’s coming out of your account in January whether you like it or not. You might as well get on top of it now and make some real progress by creating a free budget with EveryDollar.
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