Do You Qualify For $4.5 Billion Of Student Loan Forgiveness?
Do you qualify for $4.5 billion of student loan forgiveness?
Here’s what you need to know — and what it means for your student loans.
The U.S. Department of Education announced major changes today to student loan forgiveness that will make it easier for student loan borrowers to get student loan relief under the Public Service Loan Forgiveness program. (That said, there are 3 major things missing from student loan forgiveness). The Public Service Loan Forgiveness program helps student loan borrowers who work for a qualified public service or non-profit employer to get federal student loan forgiveness after completing 120 monthly payments and other requirements. What are these new changes and what do they mean for your student loans? Here are the details:
Does student loan forgiveness only apply to federal student loans?
Yes, student loan forgiveness only applies to federal student loans for the Public Service Loan Forgiveness program. There is no change with the new announcement, and private student loans remain ineligible.
Yes, any prior student loan payments for FFELP student loans will now count toward student loan forgiveness. FFELP student loans (Federal Family Education Loan Program) were issued prior to 2010 by private lenders such as banks but they were backed by the federal government. Some of these federal student loans are owned by the Education Department, but many are commercially-owned by private investors and financial institutions. Counting past student loan payments for FFELP Loans is the biggest change with the new announcement for student loan forgiveness. Previously, any student loan payments made for FFELP student loans were ineligible to count toward the 120 monthly student loan payments. The only available fix required student loan borrowers to consolidate their FFELP Loans into a new Direct Consolidation Loan with the U.S. Department of Education. However, student loan borrowers couldn’t count any student loan payments for FFELP Loans that were made prior to consolidation. With this new change, student loan borrowers have until October 31, 2022 to make sure their previous student loan payments for FFELP Loans count.
How much student loan forgiveness is available?
With public service loan forgiveness, you can get all your federal student loans forgiven if you meet the requirements. The Education Department says these policy changes will result in 22,000 student loan borrowers who have consolidated student loans —including previously ineligible student loans — to become eligible immediately for $1.74 billion in student loan forgiveness without any further action. An additional 27,000 student loan borrowers could qualify for $2.82 billion in student loan forgiveness if they certify additional periods of employment. That’s a total of $4.5 billion of student loan forgiveness. (That said, the total amount of student loan forgiveness is not capped at $4.5 billion. There is no total limit on the amount of student loan forgiveness available for all student loan borrowers who qualify). In aggregate, the Education Department estimates that more than 550,000 student loan borrowers who have previously consolidated student loans will get more student loan payments to count toward the 120 monthly student loan payments. On average, student loan borrowers could get an additional two years of student loan payments (24 monthly payments) toward student loan forgiveness.
How do you apply for student loan forgiveness?
You can apply for the limited waiver for student loan forgiveness through October 31, 2022.
Do you have to consolidate student loans to get student loan forgiveness?
No, you don’t have to consolidate student loans to get student loan forgiveness. If you have Direct Loans such as Stafford Loans, for example, then these student loans are automatically eligible for public service loan forgiveness. With the new changes, any prior payments made on FFELP Loans will now be eligible and count toward student loan forgiveness. You should consolidate FFELP Loans into a Direct Consolidation Loan with the U.S. Department of Education before October 31, 2022 and then count the prior student loan payments toward your 120 monthly payments. Contact your student loan servicer for details.
Under the new changes, any prior student loan payments made on Perkins Loans also will count toward student loan forgiveness.
Do all student loan payments made to be made in full each month?
No, all student loan payments don’t have to be made in full each month. Previously, a qualifying student loan payment required that a student loan borrower had to make a full student loan payment each month. The Education Department now waived that requirement, which provides more flexibility for student loan borrowers.
Do all student loan payments made to be made on time each month?
No, all student loan payments don’t have to be made on time each month. Previously, a qualifying student loan payment required that a student loan borrower had to make a student loan payment on time each month. The Education Department now waived that requirement as well.
Does Covid-19 student loan relief still count toward student loan forgiveness?
Yes, temporary student loan forbearance still counts toward student forgiveness. In March 2020, in response to the Covid-19 pandemic, Congress passed historic student loan relief through the Cares Act, which provided temporary federal student loan forbearance to millions of student loan borrowers. Thanks tow four total extensions of that legislation from President Donald Trump and President Joe Biden, student loan borrowers will get “credit” for non-payments since March 2020, which will bring them nearly two years closer to student loan forgiveness.
Does student loan forbearance and student loan deferment count toward student loan forgiveness?
Under these new changes, duty service members can now count student loan deferments and student loan forbearance toward public service loan forgiveness. Previously, the active duty service members did not get monthly credit while their student loan payments were paused.
If I get rejected for student loan forgiveness, can I appeal the decision?
If you get rejected for student loan forgiveness, you’re not alone. To date, the Public Service Loan Forgiveness program has rejected 98% of student loan borrowers. Going forward, with today’s major changes, the approval rates will significantly increase. If you are rejected for student loan forgiveness, you will have the opportunity to have your application reviewed for any errors to ensure that student loan borrowers who qualify get student loan forgiveness.
If you don’t work for a public service or non-profit employer, the Public Service Loan Forgiveness program is still available for you to apply and meet the requirements. While it’s a long-term professional commitment, it could be a pathway to federal student loan forgiveness. With student loan relief ending in a few months, make sure you understand all your options for student loan repayment. Here are some popular ways to save money:
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