Here’s who could qualify for the historic student loan forgiveness that President Joe Biden could announce at any time.
This is what you need to know: and what it means for your student loans.
Biden could be announcing a sweeping student loan cancellation for millions of student loan borrowers any day. Biden has three big decisions on student loans, and student loan forgiveness tops that list. Leaked documents from the US Department of Education show a proposed plan to pay off $10,000 of student loans for millions of student loan borrowers. Will you qualify for student loan forgiveness? Under this plan, which has not been finalized, these are the student loan borrowers who could qualify for this historic student loan relief.
1. Borrowers with federal student loans
Student loan borrowers with federal student loans will be the big winners in any broad student loan payoff. If this happens, more than 40 million student loan borrowers will see their student loans canceled. Unfortunately, private loan borrowers, those who took out student loans from a private lender like a bank, would be excluded.
2. Parents with student loans
Parents with student loans have wondered if they will qualify for student loan forgiveness. Previously, parents who took out student loans to finance their children’s college education were not expected to get student loan forgiveness. However, leaked documents from the US Department of Education show that parents could qualify for student loan relief if they have federal student loans. For example, Parent PLUS Loans may be eligible for student loan discharge.
3. Borrowers with FFELP and Perkins Loans
Student loan borrowers with FFELP Loans and Perkins Loans have traditionally been excluded from student loan relief. For example, Congress passed historic student loan relief in March 2020, which included 0% interest on student loans. However, FFELP Loans and Perkins Loans were excluded. Why? FFELP Loans, while guaranteed by the federal government, were issued before 2010 by banks and financial institutions. Most FFELP Loans, therefore, are not owned by the US Department of Education and are not considered Direct Loans. Similarly, Perkins Loans are issued by colleges and universities, not the federal government. That said, FFELP Loans and Perkins Loans could be included in large-scale student loan payoffs.
4. Borrowers earning less than $150,000
Biden is considering adding an income limit to qualify for student loan forgiveness. For example, earning less than $150,000 (or $250,000 per family) would qualify you for student loan forgiveness. In contrast, the income cap for stimulus checks in response to the Covid-19 pandemic was $75,000 for individuals. If there is an income limit, it is not clear if it is a hard limit or if student loan forgiveness would be phased out for any income above the income threshold. If the Department of Education has your income information, student loan forgiveness could occur within 45 days. Otherwise, student loan borrowers can apply for student loan forgiveness online and self-report their income.
5. Borrowers in default on student loans
Student loan borrowers in default on student loans may be able to get automatic student loan forgiveness. There are approximately 8 million student loan borrowers in student loan default, meaning they haven’t made a student loan payment in at least 270 days. Sen. Elizabeth Warren (D-MA) says these student loan borrowers and delinquent student loan borrowers are especially vulnerable without student loan forgiveness and if student loan payments restart. Biden has already pledged to give delinquent student loan borrowers a “fresh start” on their student loans, which would put them in good standing on their federal student loans.
Student Loans: Next Steps
Will your student loans be cancelled? (Here are 4 things to expect with student loan discharge.) Neither the White House nor the Department of Education has confirmed that Biden has decided to implement a $10,000 student loan cancellation. Importantly, the Biden administration could decide not to enact large-scale student loan cancellation or it could modify the Department of Education’s proposal. That said, before August 31, Biden said he would decide whether to enact student loan cancellation. That’s the same day the student loan payment break ends for millions of student loan borrowers. Student loan borrowers hope to avoid a nightmare scenario of no student loan cancellation and student loan payment restart. Regardless of what Biden decides, his best strategy is to prepare for the restart of student loan payments. Here are some popular ways to pay off student loans faster and save money: