How to Apply for Student Loan Cancellation?

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Stanley Tate

#1 Student Loan Lawyer

Updated on September 23, 2022

Millions of borrowers will automatically qualify for President Biden’s plan to cancel up to $20 thousand in federal student loan debt. But most eligible borrowers will need to apply for student loan cancellation once the application is released in October. Private student loans, including federal loans that were refinanced with a private lender, are ineligible.

The U.S. Department of Education plans to have its application for student loan forgiveness up and running in the next few weeks. Borrowers who automatically qualify for debt cancellation and those who apply by the middle of November should have their loan balances reduced or eliminated by the end of the year, according to a department spokesperson.

Keep reading to learn how to apply for President Biden’s student loan forgiveness plan.

Related: How to Apply for Student Loan Forgiveness?

How to apply for student loan cancellation

The Education Department shared that the application to get up to $20k in student loan forgiveness will be available in October. Once it’s released, borrowers can apply on the Federal Student Aid website, studentaid.gov.

According to White House officials, the application process will be straightforward. Eligible borrowers must attest that their adjusted gross income in 2020 or 2021 was no more than $125 thousand, or $250 thousand for married couples. Those who apply by mid-November will see the student loan forgiveness applied to their account before the payment pause ends this December.

The deadline to apply for student loan cancellation is the end of next year, December 2023.

The forgiven debt won’t be subject to federal income tax. A provision in the American Rescue Plan Act passed by Congress last year did away with that requirement. But according to the Tax Foundation, a few states may tax the debt if changes aren’t made ahead of time. Depending on the state, the tax liability could be hundreds of dollars.

Learn More: When Will Student Loan Forgiveness Be Reflected?

How do I know if I qualify for student loan cancellation?

Nearly all federal student loan borrowers will have some or all of their debt canceled. This includes those who are in default or have Graduate PLUS or Parent PLUS Loans.

But about six million people may need to consolidate their federal loans into the Direct Loan Program to benefit — even if they’ve previously consolidated.

Biden’s plan applies only to those loans that the Education Department holds. If your student loan payments and interest have been frozen throughout the pandemic, the department owns your loans, and you don’t need to consolidate to get the promised debt relief.

But if you’ve had to keep making the monthly payments on your federal loans for the past two years, your debt doesn’t automatically qualify for cancellation. This is because you likely have Federal Perkins Loans or Federal Family Education Loans owned by a guaranty agency or the school you attended for undergrad. Those loans must be consolidated into the Direct Loan Program before they’re eligible for the forgiveness benefit. Read more about FFELP Loan Forgiveness.

You can find out what type of loans you have by contacting your student loan servicer or logging onto studentaid.gov.

Related: FFEL Stafford Subsidized and Unsubsidized Forgiveness Options

Direct loan consolidation might not be the best choice for everyone. That’s why the Biden administration is working on expanding access to FFEL borrowers without the need for consolidation.

How much debt forgiveness will I get?

The federal government will lower most borrowers’ balances by $10 thousand. People who got at least one Pell Grant, a type of financial aid available to undergraduate students from low-income families, will get $20 thousand in debt forgiveness.

You can find out if you received a Pell Grant by visiting studentaid.gov. If you attended college before the mid-1990s, you might be unable to view your grant history online. If that’s the case, the Education Department will review its records to see whether you received a grant.

Related: How Do I Know If My Student Loans Would Be Discharged?

Other Forgiveness Opportunites

The Biden administration has been working hard to improve the federal student loan forgiveness programs. In the past two years, it’s wiped out over $32 billion in loan forgiveness for 1.6 million people. Beneficiaries include public servants, permanently disabled people, those defrauded by failed for-profit schools, and active duty service members.

That forgiveness comes on top of President Biden extending Trump’s initial forbearance several times, the most recent being until the end of this year.

Here are three forgiveness opportunities you can take advantage of in addition to Biden’s debt cancellation.

Public Service Loan Forgiveness Waiver

Deadline: Oct. 31, 2022.

If you worked full-time for the government or a nonprofit organization any time after Oct. 1, 2007, you qualify for credit towards the Public Service Loan Forgiveness (PSLF) Program. The PSLF Program writes off your remaining balance tax-free after you’ve made 120 qualifying payments while working in public service.

The Education Department introduced a PSLF Waiver, which temporarily relaxed the program’s eligibility requirements for a limited time. That limited waiver will give you credit towards PSLF for payments you made on nonqualifying loans and payments that were late or for less than the full amount due.

Tens of thousands of borrowers have used this unique opportunity to get their loans forgiven. Read more about the temporary PSLF Waiver.

Income-Driven Repayment Waiver

Deadline: Dec. 31, 2022 (or possibly later).

People think that they have to pay back their loans until they die. That’s not true! The Education Department offers income-driven repayment plans where you only have to pay back what you can afford for 20+ years. After that, the remaining balance on your loans will be forgiven.

Related: Student Loan Forgiveness After 20 Years

This forgiveness program isn’t well-known. Yet it has the potential to help millions of Americans get out of student debt, especially those who have been struggling with their loans for years.

Normally, you must make at least 240 on-time monthly payments under an IDR plan before your loans may be forgiven. But for a limited time, the department is giving people a break. It’s using a one-time waiver and account adjustment to credit borrowers for any payments made since taking out the loan — even if their monthly payment was zero or made under a non-qualifying repayment plan. The department’s also giving them credit towards IDR forgiveness for time spent in long-term forbearances and some deferment periods.

To qualify for the repayment waiver, you must consolidate your loans into a Federal Direct Loan. The department and your servicer will review your federal student loan payment history and tally your total number of payments and eligible deferment and forbearance time.

Learn More: One-Time Payment Count Revision for Eligible IDR Borrowers

Borrower Defense to Repayment

Deadline: There’s no deadline to apply.

If you went to a school that closed or your degree isn’t worthless because the school was a sham, you can try to get rid of your debt by submitting a closed school discharge or borrower defense claim to the Education Department.

Getting a discharge because your school closed is straightforward if the school closed while you were in attendance. But if it shuttered its doors years after you left, you’ll have to look to another option to get any relief.

The Education Department has approved group student loan discharges for borrowers who attended Corinthian Colleges, DeVry University, ITT Tech, and over 150 other for-profit schools. Read more about the borrower defense school list.

You can submit a claim online at studentaid.gov.

Bottom Line

Can you cancel student loan debt? Absolutely — and it’s never been easier. The Education Department has relaxed its rules and expanded the types of loans, payments, and situations that qualify for cancellation. Most forgiveness opportunities won’t happen immediately. But they will happen if you take the steps to qualify. Let’s talk if you have questions about how to maximize your forgiveness options.

UP NEXT: Navient Student Loan Forgiveness

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