Americans can now cancel $10,000-$20,000 of their federal student loan debt by taking their first step. The Department of Education says their application is easy to use and can be accessed on their website.
The president announced in August a plan to forgive most federal student loans. Under Biden’s plan, people who earn less than $125,000 per year can cancel $10,000 in debt, while married couples can cancel $10,000 each if they earn less than $250,000 together. People with Pell grants, which are for low-income students, can cancel an additional $10,000, for a total of $20,000, if they meet the income requirements.
While Biden’s loan forgiveness plan was welcomed by those with student loan debt, it faced challenges from political opponents. The Biden administration reversed debt cancellation for hundreds of thousands of borrowers who have Perkins loans and Federal Family Education Loans (FFEL) with private lenders.
The White House estimates that 43 million federal student loan borrowers are eligible for forgiveness, but most of them will need to fill out an application to receive it. The Department of Education only has income information for 8 million borrowers, but it recommends that every federal student loan borrower should apply—even those who may automatically qualify.
Gather your income information and fill out the Department of Education application by Nov. 15 to receive forgiveness before payments resume in January. You will know if you are approved within 4-6 weeks.
Federal student loan payments will begin again next year. It is a good idea to make a budget that includes lower monthly student loan payments. Other things that you can do with your money include building an emergency fund, paying down high-interest debt, or investing in a traditional retirement plan.
The Department of Education will keep processing applications for student loan forgiveness until 2023, but you should apply by mid-November to get relief before the payment pause period ends.
If you are eligible for forgiveness, it is important to keep your loan servicer informed of your current contact information, and to regularly check your mail or email for updates about your loan status.
If you are getting emails, phone calls, or text messages from people or numbers you do not recognize about student loan forgiveness, be careful. There are a lot of scams and false information related to Biden’s loan forgiveness, and federal officials are warning people about it.
The White House recently said it plans to stop student loan scammers nationwide, and gave some tips to help borrowers avoid fraud in connection to student loan forgiveness. According to the Department of Education, here are some things to do and not do:
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