Now, more than a year-and-a-half after being sworn in, Biden is attempting to deliver on his campaign promise, announcing that his administration will cancel up to $10,000 in federal student loan debt (or up to $20,000 in federal student loan debt for Pell Grant recipients).
According to a White House statement concerning the matter, approximately 45 million Americans hold student loans totaling $1.6 trillion. About 20 million borrowers could have their debt completely eliminated, per The Washington Post.
Federal Student Loan Payment Pause Extended Until End of Year
As expected, President Biden has also officially extended the student loan payment moratorium until Dec. 31, but it will be the final extension. Federal student loan payments will resume on Jan. 1, 2023.
The Department of Education has income details stored for nearly 8 million borrowers who may not need to take any additional steps for their student debt to be reduced, according to The Washington Post. But for the rest of those individuals trying to figure out if they are eligible for their student loans to be forgiven, there has been very little information on what the debt relief application will look like.
The White House fact sheet reads: “The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year.”
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Information Regarding Student Loan Forgiveness Still in Limbo
But as Michelle Dimino — senior education policy leader, Third Way — told CNBC’s “Make It”: “Most borrowers won’t automatically see their balances be cleared or reduced… we’re all sitting tight for more information.”
While you wait for more details and instructions as to how to apply, there are things a borrower can do to prepare for the application process.
As CNBC suggests, the first thing you should do is to verify your income — according to your 2020 and 2021 tax return filings — and make sure you meet the eligibility threshold concerning earnings. Only those who earn under $125,000 per year (or $250,000 for a married couple filing taxes jointly) may apply for federal student loan cancellation.
Second, Pell Grant recipients can access pertinent records by logging into your Free Application for Federal Student Aid (FAFSA) account.
CNBC also advises that all borrowers should sign up for federal student loan borrower updates through the U.S. Department of Education. By doing so, borrowers will be notified when any new information is available.
Additionally, those eligible for loan forgiveness should keep their FAFSA profile information up-to-date and have their loan documentation and tax returns for the last two years at the ready to prove eligibility.
White House Promises Easier Enrolment in 2023
In the future, the Department of Education will make it easier for borrowers who enrol in this new plan to stay enrolled, according to the White House fact sheet. “Starting in the summer of 2023, borrowers will be able to allow the Department of Education to automatically pull their income information year after year, avoiding the hassle of needing to recertify their income annually,” the fact sheet outlines.
In the meantime, expect some news from the Biden administration — and the U.S. Department of Education — on how to apply for student debt reduction in the near future.
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