What to expect when applying for student loan forgiveness under two Big Biden initiatives

The Biden administration is ramping up student loan forgiveness processing for two key initiatives. One – the PSLF Limited Waiver Program – ends in a few weeks. The other — Biden’s one-time debt forgiveness initiative to erase up to $10,000 or $20,000 in student loans for most borrowers — is just getting started.

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

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

Under Biden’s unique debt forgiveness initiative, millions of borrowers will be eligible for up to $20,000 in federal student loan forgiveness. Borrowers who have received Pell Grants can get the maximum amount of loan forgiveness, while borrowers who have not received Pell Grants can still get up to $10,000 in debt forgiveness. Eligibility is limited to borrowers who earned less than $125,000 ($250,000 if married) in 2020 or 2021.

The Department of Education will post an application for student loan forgiveness in a few weeks, and it should be available on StudentAid.gov. Borrowers will have until December 31, 2023 to apply. The request should be a simple income statement. Although the administration says some student loan forgiveness will automatically be given to borrowers if the Department of Education already has a borrower’s income data, all borrowers are encouraged to submit an application.

After the application is submitted, administration officials expect a processing time of four to six weeks. Next, the Ministry of Education will apply the approved student loan forgiveness allocation in the following order: first to defaulted student loans held by the government, then to FFEL loans held by defaulted commercial enterprises, then direct and FFEL loans held by the ministry in good standing. , then to Perkins loans held by the Department in good standing. For borrowers who have multiple federal student loans in the same category or program, the Department of Education will prioritize loans with the highest interest rate first, then focus on unsubsidized loans. .

Some borrowers may see a reduction in their monthly student loan payments after their student loan forgiveness has been applied to their balance, as the Department of Education will re-amortize loan balances for borrowers in non-payment-focused plans. Income.

Borrowers who made payments during the Covid-19 student loan pause will be eligible for automatic refunds if their payments reduced their balance below the maximum amount of student loan forgiveness they would have received under the initiative. of the Biden administration if they had not made these voluntary payments. Other borrowers with government-held federal student loans can request repayment of voluntary payments made during the pandemic, although those repayments are not automatic.

The Department of Education will perform a small number of audits to verify borrowers’ income information as it appears on their student loan forgiveness application.

Application process for borrowers wishing to benefit from the PSLF limited exemption

The Biden administration signed into law the limited PSLF waiver last year. The waiver temporarily changes several of the strict rules of the PSLF program to extend what qualifies as “credit” to the 120 qualifying payments required for borrowers to obtain student loan forgiveness through Public Service Loan Forgiveness. Specifically, the limited PSLF waiver allows the Department of Education to retroactively count certain past periods of payments, deferrals, and forfeitures that might otherwise have been disallowed.

Borrowers with FFEL program loans must consolidate those loans through the Federal Direct Consolidation Loan Program by October 31, 2022 to be eligible. And direct and FFEL borrowers who have not yet completed and submitted the PSLF employment certification forms will also need to do so by this date.

The processing of direct loan consolidation applications usually takes about thirty to sixty days after a borrower submits their application. To benefit from the limited PSLF exemption, FFEL borrowers must submit their request for direct consolidation (and their PSLF forms) before the end of October, but the National Education does not have to complete the processing by then.

Borrowers must select MOHELA – the Ministry of Education’s managing agent contracted to manage the PSLF program – as the loan managing agent. MOHELA is also the loan manager who will process PSLF employment certification forms. Existing direct loan borrowers whose student loans are not managed by MOHELA will have their loans transferred to MOHELA while the agency processes their PSLF forms.

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

MOHELA may initially provide borrowers with a PSLF payment tally that suggests they have made no or very few qualifying payments. This is because MOHELA will apply the more restrictive “original” PSLF rules during its initial review. The Ministry of Education is then expected to conduct its own second-tier review, applying the limited PSLF waiver and updating or adjusting the number of borrowers’ PSLFs accordingly. This process can take several months and not be completed until well after October 31st.

Borrowers who believe MOHELA or the Department of Education have understated their eligible PSLF payments under the Limited PSLF Waiver may submit a request for appeal or reconsideration. “We recommend that you wait until the end of the limited PSLF waiver period … before submitting a request for reconsideration so that our assessment of your request is based on the most current information,” the Education Department says.

Resources for Borrowers Applying for Student Loan Forgiveness

  • To learn more about the Biden administration’s one-time debt cancellation initiative, visit the Department of Education website dedicated website.
  • To learn more about the limited PSLF waiver, visit the Department of Education website dedicated website.
  • To discover or complete the direct grouping of credits, go here.
  • To begin the process of completing the PSLF employment certification forms, use the PSLF Helper Tool.
  • To file a request for PSLF review, go here.

Further Reading on Student Loans

134 groups urge Biden to extend expiring student loan forgiveness initiatives, while top officials tell borrowers to apply now

Student loan borrowers should note these critical dates for loan cancellation and repayment

Millions of student borrowers to get payments back under Biden’s loan forgiveness initiative

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

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