Unraveling the student debt relief programs

On Aug. 24, the Biden administration announced a debt relief plan that would assist individuals with student debt. The highlight of the plan is $10,000 in student debt cancellation for those who make less than $125,000 per year and $20,000 in debt cancellation to Pell Grant recipients who make less than $125,000 per year.

The Department of Education launched an online application for individuals whose income data they do not have. The application is easy to fill out and can be found at https://studentaid.gov/debt-relief/application.

The department said that they encourage everyone to fill out the application, but noted that “nearly eight million borrowers may be eligible to receive relief automatically because relevant income data is already available.”

Once a borrower completes the application, they can expect relief within four to six weeks. The Department of Education advises borrowers to apply before Nov. 15 in order to receive relief before the payment pause expires on Dec. 31, 2022. (Loan payments have been paused and the interest rates set to zero since March 13, 2020.) However, the department will continue to process applications as they are received, even after the pause ends.

It is important to note that relief will be capped at the amount of an individual’s outstanding debt. Someone eligible for $10,000 in debt relief but whose remaining balance is $8,000 will only receive $8,000 in relief. In addition, the federal relief plan only assists with federal loans, not private ones.

Borrowers should be prepared to resume loan payments in January of 2023. To check your federal loan balance and/or Pell Grant award status, log into your Federal Student Aid account online at studentaid.gov.

Public Service Loan Forgiveness Waiver

According to the Department of Education, the “Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your direct loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.”

Through Oct. 31, 2022, there is an opportunity for a “limited PSLF waiver.” This limited waiver refers to time-limited changes to the PSLF program that allows borrowers to receive credit for past periods of repayment that would not otherwise qualify.

For more information or to see if you qualify for the PSLF program visit https://studentaid.gov/announcements-events/pslf-limited-waiver.

Fresh Start Initiative

The Fresh Start Initiative is meant to help student loan borrowers who are in student loan delinquency or student loan default. According to the Department of Education, “Under the Fresh Start Program, borrowers whose federal student loans were delinquent or in default prior to the pandemic will be able to re-enter repayment in good standing.” For more information on the Fresh Start initiative visit https://studentaid.gov/announcements-events/default-fresh-start or call the Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).