In late August 2022, U.S. President Biden unveiled a plan to alleviate student debt that encompasses multiple benefits, one of them being the forgiveness of student loans. While the project is still in the works, students with loans are already scrambling to find information, such as the procedure for requesting the cancellation of a student loan or whether they must apply for it. Here we present the information we have for now.
Will Students Have Their Loans Forgiven?
Following the announcement, any eligible student will be granted a maximum of $20,000 in debt forgiveness. This amount will vary based on the student’s income and if the student was on the Pell Grant scholarship when receiving the loan.
Although this announcement has been formally made, the cancellation of student loans under this program may be delayed or not occur. Legal actions could disrupt the schedule or prevent the implementation of the proposed plan.
What Does Mr. Biden’s Plan to Cancel Student Loans Entail?
The plan is designed to lessen the debt burden of academic loans for eligible borrowers. They will get no more than $20,000 if they have also been awarded a Pell Grant and if their income is less than $125,000 for a single person or $250,000 for a couple.
Students who were not on the Pell Grant may qualify for debt relief limited to $10,000 if their salary is under $125,000 for a single person or $250,000 for a couple.
Regardless of the case, this debt forgiveness program for student loans is unique. No borrower will receive any extra from this program, irrespective of their income or balance.
Additionally, Department of Education loans (also known as federally issued school loans) are the only loans eligible for debt relief, regardless of the institution that administers them. Privately issued academic loans are excluded from this program. Also, debt forgiveness is not repayable, which means that individuals who owe less than the highest amount they qualify for will have their debt forgiven but will not be paid the excess amount.
Who Is Eligible for Academic Loan Forgiveness?
Borrowers with incomes under $125,000 as individuals or $250,000 as families are eligible to have their federally issued student loans forgiven to a maximum of $10,000. Also, those who received a Pell Grant when they obtained their school loans are likely qualified for an additional $10,000 in forgiveness, bringing the total to $20,000.
The Way the Cancellation of Student Loans Works
The method of operation for the new Biden program will differ as to whether or not the DOE has any information about your income. The process could be done automatically if you opt for a repayment based on income. Otherwise, a simple form will need to be completed to communicate your information.
To be kept informed of updates regarding the process, go to the StudentAid.gov page to validate your personal information. It will let you sign up to get emails or SMS messages from the U.S. government about the program. Also, after logging in, you can browse all recent announcements to stay on top of any information you have skipped.
It would help if you also were confident that your information is accurate and up-to-date with your lending provider. If you need to know who that organization is, log into your student assistance account to get those details.
For individuals who must apply, the form will be applicable as of October 2022. The DoE suggests you submit your application on or before Nov. 15, 2022, so your loan cancellation can be processed before the final payment break. However, in the event you miss this deadline, it is still possible to apply.
This application will remain in effect through Dec. 31, 2023, allowing you one more year to send in the necessary info.
Procedure for Requesting Cancellation of Student Loans under the CARES Act
In theory, the CARES Act does not allow student loan cancellation. Instead, a simple pause was granted on payments and interests on student loans upon the formalization of the CARES Act.
As of March 2020, the payment period and interest have been extended. Following numerous extensions, this freeze is expected to end – indeed, this time – on Dec. 31, 2022. Accordingly, borrowers with balances remaining beyond that date are urged to plan to resume payments then, with a first installment due on the scheduled January 2023 due date.
Student Loan Cancellation Request – 2022
The question of deciding if a student must apply for the waiver or if it will be automatic is whether the U.S. DoE has the information it requires on file. Approximately 8 million people may qualify for an automatic waiver, mainly because they have reported income data to be eligible for an income-based refund or other such programs.
As for other qualified borrowers, another form is in the works that will be used to collect the necessary information. It is scheduled for release in October 2022, but notification of its arrival can be received by registering on the DoE registration page.
After completing the application, students will get debt relief within 4-6 weeks. As such, those who submit their application sooner will have their balance deducted before the end of the extended payment break, set for Dec. 31, 2022.
So Will Biden Cancel All Student Loans Again?
As of now, we are still determining if there will be any more cancellations of student loans. Several experts speculate that the presidential administration will not offer anything more. So borrowers and students are advised to plan appropriately.
However, it doesn’t imply that there will never be another round of school loan forgiveness. Congress could eventually come up with something of its own, which Biden would endorse afterwards. But there is no guarantee that this will ever come to fruition, so be mindful of all this when taking decisions about finances.
How Will I Be Notified If My School Loans Have Been Cancelled?
It is still being determined precisely how individuals will receive notification that their loans have been cancelled. Statements may be made by loan administrators, but these details have not yet been officially disclosed. Therefore, students requesting cancellation – or borrowers who qualify for automatic cancellation – should keep an eye on their online accounts and check their correspondence for more info from their administrators.