How borrowers can prepare for federal student loan forgiveness


Applications for President Joe Biden’s one-time widespread student loan forgiveness aren’t available yet—but there are still a number of steps borrowers can take to prepare for when they are.

Biden announced last month his administration would forgive up to $20,000 for federal borrowers who were Pell Grant recipients, and up to $10,000 for everyone else meeting certain income requirements. But to receive the relief, most borrowers will have to apply for it on the U.S. Department of Education’s website.

The application launch is still weeks away, according to the most recent information from the Education Department. There isn’t specific information available yet on what the application will entail, except that it will be “simple.”

But while they wait, borrowers should prepare the necessary information so they can apply as quickly as possible—especially because forgiveness will be granted on a rolling basis. The earlier you apply, the sooner you may see your account balance dip, assuming you are eligible.

“I think one thing that is important if you’re a borrower is to know your servicer, that’s the number one thing,” says Bobby Matson, founder and CEO of Payitoff, a debt management company. “Get your information ready. Have your data downloaded, have an idea of what your balance is”

A servicer is basically the middle-man between you and the federal government. They bill you each month keep track of your payments. For federal borrowers, this could include Aidvantage, Edfinancial Services, FedLoans Servicing, Great Lakes, MOHELA, Nelnet, or the Oklahoma Student Loan Authority.

It’s especially important to double check which company services your loans now because millions of borrowers’ accounts were switched during the COVID-19 pandemic. The last company you made a payment to before the federal payment pause was put into place may not be the company that currently holds your loans. To find your servicer, log in to My Federal Student Aid (FSA).

Check your loan type

You will also be able to view your loan details, including your balances and which type of loans you have, via your FSA account. Most federal borrowers and loan types qualify for forgiveness; however, there are a few exceptions.

All direct loans qualify, as do graduate and Parent PLUS loans held by the Department of Education. That said, there are a few million borrowers who have commercially-held Federal Family Education Loans (FFEL). These are held by private companies and are not currently eligible for forgiveness. But, those borrowers may be able to consolidate into a direct loan, and the government has said it is trying to find a work around to expand eligibility to those loans.

You can also figure out now if you qualify for forgiveness based on your income. Individuals who earned an adjusted gross income (AGI) of less than $125,000—and under $250,000 for married couples and heads of household—in 2020 or 2021 qualify. You will self-certify your income. If you’re close to the cutoff, check your AGI on line 11 of your tax return, IRS Form 1040.

If you took out your loans after 1994, then you will also be able to see if you are a Pell Grant recipient in your FSA account.

Don’t wait to apply

Borrowers can expect to see the relief reflected in their accounts about four to six weeks after they submit their application, according to the Education Department. That said, this is the first time the department is undertaking anything to this magnitude—so borrowers should expect some hiccups and potentially delays, says Matson.

The Education Department is encouraging borrowers to apply before November 15 so that the relief is reflected in their accounts—and their monthly payments are recalculated—before federal payments resume in January 2023.

All that said, around 8 million borrowers may have their debt forgiven automatically, no application required, according to the Education Department. They will be notified by their servicer if forgiveness is automatic.

Everyone else should make sure they have the information necessary to make the application process as seamless as possible. There will also be a paper application available at a later date for those who do not or cannot apply online.

“Know your credentials, know your servicer,” says Matson. “That’s the best thing. Borrowers can do that right now.”

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