Student loan forgiveness FAQ
Hey Smarty Pants,
You’ve heard about the president’s $10,000 or $20,000 student loan forgiveness program - but who qualifies? What do you have to do? What about grad school? Taxes? Defaults?
Everything you need to know about the student loan forgiveness program
In this post, I’m explaining everything we know as of Aug 25, 2022 about the student loan forgiveness program, so you can get answers to your student loan forgiveness questions.
The basics of the Biden student loan forgiveness program is that student loan borrowers will get:
Up to $10,000 of their student loans cancelled for those making $125,000 or less ($250,000 for married couples filing jointly or heads of household)
If you ever received any Pell Grant of any size while you were in school, you can get up to $20,000 of your student loans cancelled - with the same income stipulations
To find out if you did get a Pell Grant, just log into studentaid.gov and go to your Dashboard. If you got a Pell Grant, it will show in the “My Aid” box.
Now let’s get into the important details about the student loan forgiveness update to see if you’re eligible -
What loans are eligible for student loan forgiveness?
This money will go to undergraduate as well as graduate federal loans. It can be applied to Graduate PLUS and Parent PLUS loans as long as they also fit within the income limits. It does not apply to FFEL loans (which is kinda BS but what do you do?)
They say “up to” $10,000 or $20,000 because they’re only going to pay your remaining balance - if you owe $6,000 in student loans, they’re not going to hand you a check for $10 grand - - they’re going to pay off the $6,000 - still, awesome!
Get the student loan forgiveness cheat sheet
13 different federal student loan forgiveness programs, explained in plain English!
Are the cancelled student loans taxable?
This money to pay off your student loans is not taxable. You won’t be taxed on it.
Do I get my student loans forgiven if I didn’t finish my degree?
Even if you didn’t finish your degree, you’ll still qualify for this student loan cancellation.
What happens to my student loan forgiveness if my student loans were in default?
For those whose loans were in default, if you benefited from the payment freeze, you’re eligible for this money. In fact, your loans will be deemed current so you can get onto a payment plan that works for you without the normal rigamarole that goes with student loan defaults.
What do I need to do to get my student loan forgiveness money?
To get this money, if you are on an income-based repayment plan already, then the Dept of Education knows how much you make and you should qualify automatically. If you are not on an income-based repayment plan, there will be an application launched before December 31st, possibly within the next few weeks, for borrowers to share their income information and then qualify for student loan forgiveness.
Be sure your contact information is correct with the Department of Education and your student loan servicing company so they can reach you!
What about the student loan payment freeze?
Federal student loan repayments are going to be paused until December 31st, so payments for your *remaining* balance will start up again in January.
Since your balance changed, your payment amount may change, keep in touch with your student loan servicer to find out what you’ll owe in January.
What is the cutoff date for the student loan forgiveness program?
Any loans obtained after June 30th will not be eligible for this cancellation.
How does the student loan forgiveness program affect public service loan forgiveness (PSLF)?
If you’re going for public service loan forgiveness, this will not change whether you get it - BUT be sure to apply before OCT 31, even if you don’t have the 120 payments yet, because there’s an AMAZING waiver which expires on October 31st, watch my videos on public service loan forgiveness (especially this one) or suffer the financial consequences.
What else does the new student loan forgiveness program provide?
The news is more than just the $10,000 or $20,000 in student loan cancellation.
There’s going to be a new income driven repayment option!
They will offer a new income driven repayment option that is only 5% of your discretionary income, rather than the current 10% - - and after ten years of payments, once the loan gets below $12,000, it’s forgiven.
On top of this, if that 5% payment is less than the amount of interest you owe that month, the government will pay your interest so that your student loan balance will never go up due to student loan interest.
If you want to sign up for updates from the Department of Education so you can stay on top of student loan forgiveness news, click this link: https://www.ed.gov/subscriptions.
That’s pretty much all we know for right now. It’s very exciting - congratulations if you got some or all of your student loans forgiven! Now to fix the whole issue with the cost of higher education in America…
Cheers,
Kate