How to Know What Student Loan Forgiveness Means to You

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students protesting student loans

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The pause on student debt finally made me feel like I could breathe. In March 2020, when President Biden announced that bill collection on all government-funded student loans would be suspended, it saved my money for a rainy day for the first time in my adulthood. . It instantly changed my quality of life: I was able to live on my own and could afford a decent gym membership. After two years, this break is still in effect, with payments are expected to resume in January.

Additionally, last August, Biden announced that certain borrowers would soon be eligible to be forgiven for up to $20,000 in student loan debt. But in the weeks that followed, that plan got more complicated, and for some people what initially seemed like a path to financial freedom might not be much help at all.

Initially, Biden’s mandate provided up to $10,000 for federal student loans, including an additional $10,000 relief for Pell Grant recipients earning less than $125,000 (or $250,000 in a household at common income). The general understanding of the forgiveness plan seemed to be this: if you received a loan that was handed out by the government – ​​whether that loan was federal or private – you were qualified to be forgiven. Last week, the Ministry of Education directive quickly changedreversing the decision for what he says is about 770,000 borrowers.

Does the cancellation apply to me?

If your student loans are held by the US Department of Education, you are still eligible for debt relief. This includes Direct Loans (also known as William D. Ford Direct Loans), Parent PLUS Loans, and GRAD Plus Loans. If you have not repaid your loans to the Ministry of Education, which means you have not been able to meet the payments due to financial hardship, you are still included. And if you’ve consolidated other types of loans into direct loans with the goal of lowering your payments over time, the discount also applies to you.

The reversal only applies to people on FFEL and Perkins loans, two now-defunct programs funded by states and private lenders like Sally Mae, banks and investors. This is why consolidation into direct loans made a difference, as it brought these types of loans under the control of the Federal Ministry of Education. The deadline for consolidating them was September 29, just one month after Biden’s announcement – an unfortunately short time frame, given that many of us are still confused on how this all works.

According to the Department of Education, most borrowers must apply to receive forgiveness. The nominations are should be available this monthalthough the Ministry of Education has not confirmed an exact date, and they are expected to be open until December 31, 2023.

Why was the decision overturned?

Whereas there is no official reason pointing out why the Department of Education and President Biden have reduced eligibility for debt relief, many believe this is related to a recent lawsuit filed by Missouri, Nebraska, Iowa, Carolina South, Kansas and Arkansas, six Republican states that oppose the administration’s debt relief program. FFEL is mentioned prominently throughout the complaint, which argues that various state entities that currently hold these loans, such as the State of Missouri’s Higher Education Loan Authority, would lose revenue if these loans were canceled.

Those states lawsuit supports that debt cancellation is a violation of President Biden’s executive power, despite the Trump administration using the HEROES Act to suspend interest rates and payments during the pandemic. In Augustthe Biden administration extended the hiatus and proposed the one-time rescission under the same HEROES Act of 2003.

What is the HEROES Law?

Higher Education Student Support Opportunities Act (HERO Law) was designed to alleviate student financial hardship during a national emergency. Crafted after the September 11, 2001, terrorist attacks, the law gave the Secretary of Education the power to waive student loan orders. Since COVID-19 was declared a national emergency on March 13, 2020, the secretary halted repayment of federal loans. In March 2022, the Senate voted to end the national emergencyhowever, a decision that muddies the administration’s argument that the HEROES Act still applies.

What are my next steps?

Many people who received FFEL and Perkins loans too have direct loans. If this is you, you can still receive a rebate on your direct loans.

If you had FFEL and/or Perkins loans and consolidated your debt into direct loans before the September 29 deadline, remember that you still need to apply to be forgiven. You will be notified once the cancellation has been added to your account.

If you didn’t consolidate your debt in time, the story may not be over. The Ministry of Education says it is discussing “alternative pathswith private lenders to provide relief to those affected. The best way to follow is to check Federal Student Aid for updates. Because it seems clear: even if loan forgiveness applies to you, it will be your responsibility to ensure that you are aware of any complicated process that will help you obtain it.

Kristin Corry is a Senior Writer at VICE.

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