What To Expect When You Apply For Student Loan Forgiveness Under Two Big Biden Initiatives

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The Biden administration is accelerating student loan forgiveness processing actions for two major initiatives. One – the limited PSLF waiver program – expires in a few weeks. Others — Biden’s one-time loan cancellation initiative to wipe out up to $10,000 or $20,000 in student loans for most borrowers — are just getting started.

As millions of borrowers get ready to submit their student loan forgiveness applications, here’s what to expect.

Application Process for $10,000 or $20,000 in Student Loan Forgiveness Under the Biden Initiative

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Under Biden’s one-time loan cancellation initiative, millions of borrowers with federal student loans held by the government will be eligible for up to $20,000 in federal student loan forgiveness. Borrowers who receive Pell Grants can receive the maximum loan forgiveness amount, while borrowers who have not received Pell Grants can still receive up to $10,000 in loan cancellations. Eligibility is restricted to borrowers who earned less than $125,000 (250,000 if married) in 2020 or 2021.

The Department of Education will release a student loan forgiveness application in a few weeks, and it should be available at StudentAid.gov. Borrowers will have time till December 31, 2023 to apply. The application is expected to be a simple verification of income. While the administration maintains that some student loan forgiveness will be automatically granted to borrowers if the Department of Education already has a borrower’s income data, all borrowers are encouraged to submit an application.

After submitting the application, administration officials expect a turnaround of four to six weeks for processing. Then, the Department of Education will apply approved student loan forgiveness awards in the following order: first to government-held defaulted student loans, then commercially held FFEL loans in default, then government-held direct loans and government-held FFELs in good standing. loan, and then the Perkins loan held by the government in good standing. For borrowers who have multiple federal student loans in the same category or program, the Department of Education will first prioritize the loans with the highest interest rates, and then focus on loans that are unsubsidized.

Some borrowers may see their monthly student loan payments decrease because their student loan forgiveness is applied to their balances, as the Department of Education will re-amortize loan balances for borrowers in non-income-driven repayment plans.

Borrowers who made payments during the COVID-19 student loan pause would be entitled to an automatic refund if their payments reduced their balance to less than the maximum amount of student loan forgiveness they would have received under the Biden administration initiative if they had made those voluntary payments. payments would not have been made. Other borrowers with government-held federal student loans can request refunds of voluntary payments made during the pandemic, although those refunds will not be automatic.

The Department of Education will conduct a small number of audits reported on their student loan forgiveness applications to verify borrowers’ income information.

Application Process for Borrowers Pursuing Limited PSLF Waiver

The Biden administration enacted the limited PSLF exemption last year. The waiver temporarily replaces several strict rules of the PSLF program to expand what qualify as “credits” to the 120 qualifying payments required for borrowers to receive student loan forgiveness through Public Service Loan Forgiveness. In particular, the limited PSLF exemption allows the Department of Education to retroactively count certain periods of pay, deferment, and forbearance that might have been denied otherwise.

Borrowers with FFEL-program loans must consolidate those loans through the Federal Direct Consolidation Loan Program before October 31, 2022, to qualify. And direct and FFEL loan borrowers who have not yet completed and submitted the PSLF Employment Certification Form will also have to do so by that date.

Processing of direct debt consolidation applications usually takes about thirty to sixty days after a borrower submits his application. To qualify for the limited PSLF exemption, FFEL borrowers must Presented Their direct consolidation applications (and their PSLF forms) before the end of October, but the Department of Education is yet to complete processing.

Borrowers should select MOHELA – the Department of Education contracted to handle the PSLF program – as their loan servicer. MOHELA is also the loan servicer who will process the PSLF employment certification forms. Existing direct loan borrowers whose student loans are not serviced by Mohela will have their loans transferred to Mohela as the agency processes their PSLF form.

On the PSLF Employment Certification Form, borrowers can indicate whether they wish to count only eligible PSLF payments, or whether they believe they have made at least 120 qualifying payments required to receive student loan forgiveness under the program. If so, borrowers can also request forbearance while their forms are processed. Borrowers must submit a separate employment certification form for each of their public service employers.

MOHELA may initially provide borrowers with PSLF payment calculations indicating whether they have made zero or very low payments. This is because MOHELA will apply the “basic,” more restrictive PSLF rule, during its initial review. The Department of Education then has to conduct its second level review to implement the limited PSLF exemption and update or adjust borrowers’ PSLF calculations. This process can take several months, and may not be completed until after October 31.

Borrowers who believe that Mohela or the Department of Education have reduced their eligible PSLF payments under the limited PSLF exemption can Submit an Appeal or Reconsideration Request, The Department of Education says, “We recommend that you wait until the limited PSLF grace period is over … before you submit a review request so that our evaluation of your request is based on the latest information.”

Resources for Borrowers Seeking Student Loan Forgiveness

  • To learn more about the Biden administration’s one-time loan cancellation initiative, visit the Department of Education dedicated website,
  • To learn more about the limited PSLF exemption, visit the Department of Education dedicated website,
  • To ascertain or complete direct debt consolidation, go here,
  • Use Department of Education to start the process of filling PSLF Employment Certification Form PSLF Assistance Tool,
  • To submit PSLF reconsideration request, go here,

further student loan reading

134 groups urge Biden to end student loan forgiveness initiative, while top executives tell borrowers to apply now

Student loan borrowers should write down these important dates for loan forgiveness and repayment

Millions of student loan borrowers will get refunds of payments under Biden’s loan forgiveness initiative

Biden’s student loan forgiveness may be taxable in some states

Credit: www.forbes.com /

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