Type J Loans are federal loans, but the U.S. Department of Education usually does not own them directly. They’re often owned by a guaranty agency and guaranteed by the federal government — a guarantee means that the government will step in and cover the agency’s loss if student loan borrowers fall behind on their monthly payments and default.
The different ownership status means that Type J Loans and other FFEL Loans don’t automatically qualify for many of the student loan forgiveness opportunities the Biden administration announced. But there’s an easy solution: Direct Loan Consolidation.
Once the loans are consolidated, they become eligible for these three student loan forgiveness programs:
President Biden’s debt cancellation plan would reduce borrowers’ student loan debt by $10 thousand if they didn’t receive a Pell Grant, a type of financial aid available to low-income undergraduate students, and by $20 thousand if they did. The relief is only available to borrowers earning less than $125 thousand or married couples earning less than $250 thousand.
Private student loans aren’t eligible for cancellation, but Parent PLUS Loans and Perkins Loans are.
The Education Department will use the adjusted gross income on your tax return for 2020 or 2021, whichever is lower, to determine your eligibility for this benefit. Learn more about the $20,000 student loan forgiveness program. Read more about the $20k student loan forgiveness.
The Limited Public Service Loan Forgiveness Waiver allows people who’ve worked full-time for the government or a nonprofit anytime after Oct. 1, 2007, to get credit towards PSLF. If you have an FFEL Stafford Loan, you’ll need to consolidate it into a Direct Loan before Oct. 31, 2022, to qualify for the waiver. Read more about the PSLF Waiver.
Income-driven repayment plan forgiveness writes off your remaining balance after 20+ years of making student loan payments under an IDR Plan. Later this year, the Education Department will retroactively credit millions of borrowers with additional payments toward IDR forgiveness using a one-time waiver and adjustment.
Related: IDR forgiveness
Borrowers will receive credit for payments made, regardless of which payment plan they were on at the time. Besides school deferment, the department will also count months spent on deferment before 2013 as qualifying payments. It will also consider forbearances of 12 consecutive months or more, as well as 36 cumulative months or more, toward forgiveness, for income-driven repayment and the Public Service Loan Forgiveness program. Read more about the IDR Waiver.
Related: FFEL Stafford Subsidized and Unsubsidized Loans: What Are They?