Student loans

5 Questions Answered About Biden’s Student Loan Forgiveness Plan : NPR

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Last week, President Biden outlined a sweeping plan to forgive up to $20,000 in federal student loan debt per borrower. To get this maximum, individuals must earn less than $125,000 per year, or less than $250,000 per year for couples, and must have received a Pell grant in college. Non-Pell borrowers who meet these income requirements are eligible for $10,000 back.

Beneath this seemingly simple plan, however, lies a mountain of uncertainty as to exactly how it will work. Naturally, borrowers have questions. Here are the answers we know so far:

1. Do I need to submit a request for loan forgiveness?

Probably yes. These income rules we mentioned will require most borrowers to verify their income with the US Department of Education. About 8 million people already have income information on file with the department; they should be eligible for automatic cancellation of their debts. But everyone else will need to submit an application to be considered.

The Department of Education says the app will be available at the beginning of October and will take 4-6 weeks to process. Borrowers can sign up to receive email updates here.

There is currently no deadline for requesting a discount, but the administration recommends submitting requests by November 15. That way, the department has more time to process millions of applications before the student loan payment break ends on Dec. 31.

2. What types of loans are included in Biden’s discount plan?

Undergraduate loans, graduate loans, and Parent PLUS loans administered by the Department of Education are all eligible. Biden’s plan only applies to federal student loans, however; private student loans are not eligible for forgiveness, even if they started out as federal loans. If you are unsure what type of loan you have, contact your loan officer.

3. My income has fluctuated a lot during the pandemic. What year of income should I look at to see if I qualify for the rebate?

According to a senior White House official, the income of a borrower That is 2020 or 2021 must meet loan forgiveness income requirements (less than $125,000 per year for an individual, or less than $250,000 per year for couples) for that borrower to qualify for loan forgiveness. More information on how to document your income will be available in the coming weeks.

4. Why does everyone keep saying “up to” $10,000 or $20,000?

You may have noticed that in our coverage we always say borrowers are eligible for “up to” $10,000 or $20,000 back. This language comes directly from the education departmentand it’s less confusing than it looks.

Basically, if you owe $7,000 in student loans and qualify for a $10,000 forgiveness, you’ll get all $7,000 wiped out, but that extra $3,000 won’t go into your pocket. This is under the federal government.

One thing to keep in mind: If you made loan payments during the pandemic pause and your loan balance is now below the $10,000 or $20,000 benchmark for Pell recipients, you may wish to request a refund so that you can enjoy the full amount discount. More on that below.

5. I continued to repay my student loans during the payment break. Can I get that money back and have more of my loans forgiven?

The short answer is yes. Many borrowers continued to repay their federal student loans during the payment break because, with interest also suspended, it was the perfect time to reduce their debt. These borrowers need not worry: They can still benefit from Biden’s new loan forgiveness plan, even if they paid off their student loans during the break.

According to the Department of Education’s Office of Federal Student Aid“You can get a refund for any payment (including direct debit payments) you make during the payment break (from March 13, 2020). Contact your loan officer to request a refund of your payment.”

Remember that this will be a process, and you need to make sure you qualify for a certain level of cancellation, either the base $10,000 or the $20,000 for Pell recipients, before requesting your refund. Once the refund is issued, your student loan balance will increase by the value of the refund. For example: suppose you currently owe $7,000, after paying $2,000 during the moratorium. Once you receive your $2,000 refund, your balance will increase to $9,000. Your next step will therefore be to request the cancellation for this New total under Biden’s plan.