Here’s who might qualify for historic student loan forgiveness President Joe Biden could announce any day.
Here’s what you need to know – and what it means for your student loans.
Biden could announce broad student loan foreclosures for millions of student borrowers every day. Biden made three major decisions about student loans, and student loan forgiveness tops that list. Leaked US Department of Education documents show a proposed plan to cancel $10,000 in student loans for millions of student borrowers. Will you qualify for student loan forgiveness? Based on that plan, which is ongoing, here are the student loan borrowers who may qualify for this historic student loan facility.
1. Borrowers with federal student loans
Student loan borrowers with federal student loans will be the big winners in any widespread student loan foreclosures. In this case, more than 40 million student loan borrowers will cancel their student loans. Unfortunately, private borrowers — those who have borrowed student loans from a private lender such as a bank — would be excluded.
2. Parents with student loans
Parents with student loans have been wondering if they qualify for student loan forgiveness. Previously, student loan forgiveness was not expected of parents who took out student loans to fund their child’s college education. However, leaked documents from the US Department of Education show that parents could be eligible for student loan relief if they have federal student loans. For example, Parent PLUS loans could be eligible for student loan cancellations.
3. Borrowers with FFELP and Perkins Loans
Student loan loans with FFELP loans and Perkins loans are traditionally excluded from student loan relief. For example, in March 2020, Congress passed historic student loan relief that 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 by banks and financial institutions prior to 2010. Most FFELP loans are therefore 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. However, FFELP loans and Perkins loans could be implicated in large-scale student loan cancellations.
4. Borrowers earning less than $150,000
Biden is considering adding an income limit to qualify for student loan forgiveness. For example, if you earn less than $150,000 (or $250,000 per family), you qualify for student loan forgiveness. In contrast, the income cap for the stimulus checks in response to the Covid-19 pandemic was $75,000 for individuals. If there is an income cap, it is unclear whether it is a strict delimitation or whether student loan forgiveness would be phased out for all incomes above the income threshold. If the Department of Education has your income information, student loan forgiveness can be granted within 45 days. If not, student loan borrowers may be able to apply for student loan forgiveness online and self-report their income.
5. Borrowers in Default on Student Loans
Defaulting student loan borrowers could receive automatic student loan forgiveness. There are approximately 8 million student loan borrowers who are in default, meaning they have not made a student loan payment for at least 270 days. Sen. Elizabeth Warren (DMA) says these student loan borrowers and borrowers in default on student loans without student loan forgiveness and when student loan payments resume are at particular risk. Biden has already committed to giving defaulting student loan borrowers a “fresh start” with their student loans, which would put them in good standing with their state student loans.
Student loans: next steps
Is Your Student Loan Called Out? (Here are 4 things to expect when foreclosure on student loan). Neither the White House nor the Department of Education have confirmed that Biden decided to implement the cancellation of $10,000 in student loans. Importantly, the Biden administration could decide not to enact a large-scale student loan cut or change the Department of Education’s proposal. However, Biden said he would decide before Aug. 31 whether to waive the student loan cancellation. On this day, the student loan payment pause ends for millions of student borrowers. Student loan borrowers hope to avoid a nightmare scenario where no student loan cancellation occurs and student loan payments resume. Whatever Biden decides, your best strategy is to prepare for student loan payments to resume. Here are some popular ways to pay off student loans faster and save money: