According to the U.S. Department of Education, the application for student loan forgiveness will be available in early October.
People who apply may see alleviation after six weeks.
There is at least one significant action that debtors will probably wish to avoid making while they wait for the application to begin and for the forgiveness to take place.
“Don’t refinance your federal loans if you expect to receive forgiveness,” stated Mark Kantrowitz, a specialist in higher education. This is so because, according to him, private student loans are not eligible for forgiveness.
According to the White House, holders of federal student loans will be qualified for loan forgiveness of up to $20,000 if they received a Pell Grant, a sort of financial help offered to low-income undergraduate students, or up to $10,000 if they did not. Additionally, only those making less than $125,000 annually, married couples, or heads of households making less than $200,000 are eligible for the reduction.
Consumer advocates are skeptical of the advantages of refinancing your student debt due to the additional safeguards that come with federal loans, even if you owe more than you anticipate being forgiven.
However, experts advise that borrowers make a number of other wise decisions in the days to come.
Additionally, you shouldn’t assume that you won’t be eligible for student loan forgiveness or that it won’t actually happen. Here are five actions you can perform while you wait.
Ensure that your contact information is correct
Although a few Republican lawmakers might file a lawsuit to oppose President Joe Biden’s historic plan, no case has been initiated yet, and there is no way to predict how one would proceed. Experts are advising borrowers to get ready to apply as soon as they are able in the interim.
You should update your contact information at StudentAid.gov and with your loan servicer while you wait for student debt forgiveness, according to Kantrowitz.
This will guarantee that you don’t overlook any crucial information or dates.
Verify your income eligibility
Make sure you are eligible for the assistance. Review your most recent tax returns to make sure your income was less than the limits ($125,000 for individuals and $250,000 for households) before you take this action. The so-called adjusted gross income, or AGI, which may be different from your actual wage, will be taken into account by the Education Department.
Look for line 11 on the front page of your tax return, often known as Form 1040, to determine your AGI for 2020 and 2021.
Review the terms of your loan
The majority of federal student loans are eligible for cancellation. However, 5 million borrowers have older student loans that are technically held by private businesses and are referred to as commercially held Federal Family Education Loans (FFEL). By logging in with your FSA ID and selecting the “My Aid” option at Studentaid.gov, you may determine the sort of loan you have.
Even though it doesn’t retain the debt, the Education Department claims it is trying to ensure that borrowers with commercially held FFEL loans receive the forgiveness as well. However, you might want to consolidate them into the main federal student loan program if you have these loans and want to ensure that you’re eligible for forgiveness as soon as possible.
In order to evaluate whether you qualify for the full $20,000 in cancellation, Kantrowitz advised you to see if you were awarded a Pell Grant.
Beware of Scammers
Abby Shafroth, an attorney with the National Consumer Law Center, advised waiting while keeping an eye out for one of the all-too-common student loan frauds. Shafroth advised not disclosing any personal information to anyone who contacts you out of the blue and that there shouldn’t be any fees associated with asking for forgiveness.
If you have questions, speak with your loan servicer
Contact your servicer as soon as possible if you have any questions about the suspension of payments or their forgiveness.
In addition to the cancellation of student loans, Biden announced an extension of the federal student loan payment moratorium through December 31. That was the eighth extension of the Trump administration’s pandemic relief program, and it most likely was the last.
“Loan servicers are likely to be inundated with questions starting a few days before the deadlines,” Kantrowitz said.