Qualified Borrowers Can Get Up to $20,000 in Student Loan Debt Erased
Are you struggling with high student loan payments? With record-high tuition and the lasting effects of the COVID-19 pandemic, millions of Americans feel burdened by student loan debt. In fact, the typical undergraduate student with student loans graduates with about $25,000 in debt. To make matters worse, nearly a third of borrowers have student loan debt, but were unable to complete their degree.
This heavy debt burden can not only result in a large monthly payment, but can also make it more difficult to save money and get a car loan, credit card or mortgage. Around 16% of student loan borrowers are in default, including almost a third of senior citizens who were unable to pay off their student debt. Being in default can cause additional problems, since it usually significantly lowers a borrower’s credit score and impair their ability to get a job, rent an apartment or borrow money.
To give Americans some financial relief, the federal government has announced the Federal Student Loan Debt Relief program. If you qualify, you could have up to $20,000 in student loan debt forgiven.
Who Can Qualify for Federal Student Loan Relief?
Since the goal of the program is to provide federal student loan relief to those who need it most, there is an income limit. To be eligible for the program, you must have earned less than:
- $125,000 as an individual, or
- $250,000 as a married couple.
There is no age limit to qualify for student debt relief. If you still have outstanding qualifying federal student loans, you can apply. You could even be a current student and benefit from student loan cancellation.
Parents who took out a federal gov student loan for their child can also apply for student loan forgiveness. However, the income limit would apply to the parent’s income rather than the income of the student. So, the parent’s household income would need to be under less than $125,000 if filing singly or $250,000 if filing jointly with a spouse in order to qualify for student loan forgiveness.
Which Student Loans Qualify for the Student Loan Forgiveness Program?
The only type of student loan debt that qualifies for this program is federal student loans. The government is not canceling student loans that were taken out through banks or private lenders, such as College Ave. If you are having trouble repaying student loans through a private lender or bank, you may want to contact the loan servicer to see if you can work out a deferment or payment reduction.
The student loan relief program only applies to the following types of federal student loans:
- William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Federal Family Education Loan (FFEL) Program loans held by the Department of Education or in default at a guaranty agency
- Federal Perkins Loan Program loans held by the Department of Education
- Parent PLUS loans
- Graduate PLUS loans
All loans must have been disbursed by June 30, 2022 to qualify. In addition, consolidated loans may be eligible as long as all of the underlying loans meet the above criteria. Some defaulted loans may even qualify for federal student loan forgiveness.
How Much Federal Student Loan Debt Can Be Canceled?
The total amount of student loan debt that can be canceled depends on the amount of debt you currently have. It also depends on whether you received a Pell Grant and if you made voluntary payments during the COVID-related payment pause that is set to end on June 30, 2023.
The biggest difference in how much debt relief you may be able to get is whether you are a Pell Grant recipient. For the most part, Pell Grants are only given to students who come from families earning less than $60,000 per year.
These individuals have typically had more challenges repaying their student loan debt compared to those who did not get a Pell Grant. As such, the Federal Student Loan Debt Relief program gives Pell Grant recipients up to twice the amount of student debt relief that non-Pell Grant recipients can receive.
The amount of debt relief you get is also limited by your current balance of student debt. You can only get an amount that is equal to or less than the maximum allowable amount given your Pell Grant status. In other words, you will not be given any overage or cash if you owe less than the maximum amount.
The only exception to this is if you made voluntary payments on your federal student loans during the payment pause, which started in March 2020 with the passage of the CARES Act and continues through June 30, 2023. Then, you could potentially get a refund of those payments.
How Can You Get Your Federal Student Loans Canceled?
In some cases, the Department of Education will automatically initiate this process. However, most borrowers need to apply online. All you need to do is fill out the online application form provided by the Department of Education.
Once you complete it, the Department of Education will analyze your information and determine if your loans qualify for the program. The Department also works alongside the IRS to see if you meet the income qualifications. If you’re approved, you will get a notification.
It is not yet clear when student debt will start to be discharged for borrowers who meet the qualifications, as the Federal Student Loan Debt Relief program is being challenged in court. However, the Department of Education is still accepting applications during this time, and states that it will disburse funds as soon as possible.
If you believe you may qualify for federal student debt forgiveness, find out more about the program and take action by submitting the online application. If your application gets approved, up to $20,000 of your student debt may be canceled, which could help you save money and achieve your financial goals. Learn more about student debt relief programs.