President Joe Biden’s announcement Wednesday that the federal government would forgive up to $20,000 of student loans for people making under $125,000 a year was unprecedented, potentially affecting 1.19 million New Jersey residents with a total of $43 billion in college debt.
The changes raise countless questions. Here are some of the most common ones, with answers provided by federal websites and student loan experts. They include Betsy Mayotte, president of the Institute of Student Loan Advisors, (see her Reddit post, with 1,300 questions and counting) and Scott Buchanan, executive director of the Student Loan Servicing Alliance, a non-profit industry trade group.
If the president’s plan is implemented, whose loans will be forgiven?
The U.S. Department of Education will cancel up to $20,000 for people who received Pell Grants and whose loans are held by the federal Department of Education. People with such loans who did not receive Pell Grants will get up to $10,000 of debt canceled. Individual borrowers qualify for loan forgiveness if their income is less than $125,000; for households, they must earn less than $250,000.
What exact income figures are used to determine loan forgiveness?
The household income limit is based on adjusted gross income, from 2020 or 2021, not 2022. It is not yet clear if the limit will be the lesser income figure, the average of the two, or some other formula, until the government irons out the details.
How do I find out if I have a Pell grant?
Go to studentaid.gov, which is a little crash-prone recently.
What loans qualify for forgiveness?
According to the Institute of Student Loan Advisors, eligible loans include Parent Plus, Graduate Stafford and Plus, consolidation loans, Stafford loans, and defaulted federal family education loan program loans. Ineligible ones include private loans, state loans, or loans that have been paid in full.
Can I take out a new loan now and have it forgiven?
No, the loans eligible to be forgiven must have been sent to your school by June 30, 2022.
How old can a loan be and still be forgiven?
“I’ve seen open loans from the 1960s,” Mayotte said. They would still be eligible if they meet the requirements.
I had federal loans but refinanced them with a private lender, can they be forgiven?
No.
Can I revert them back into federal loans?
No.
I am eligible for loan forgiveness, but I didn’t graduate. Can my loan still be forgiven?
Yes.
When are student loan repayments starting up again, after they were paused during the pandemic?
January 2023. On Wednesday, Biden automatically extended the pause in repayments a final time through December 31, 2022.
I made federal student loan payments since March 2020, when they were not required. Can I get my money back?
Yes, call your loan servicer, if you urgently need the money. (Maybe wait a day or two. Buchanan noted that one loan servicer in his trade group had 2,000 calls waiting on hold first thing Thursday morning –and many of the answers requested are not yet available.) This has been possible since the early days of the pandemic. If you want the money back to retroactively get your loan forgiven, you may risk complicated issues with the government, as eligibility dates for loan forgiveness have not yet been issued.
“My advice to people is, if you need that cash for rent, go get it,” said Buchanan. “If you don’t need it right now, wait a few weeks wait for guidance on how that’s going to work.”
What do I need to know about the Public Service Loan Forgiveness Program?
This program forgives the remaining balances on federal student loans after 120 payments, provided you work full-time for a federal, state, Tribal, or local government; the military; or a qualifying non-profit.
Many people who work at such institutions (not just doctors and teachers but administrative assistants, cafeteria workers, gift shop workers, school custodians) are unaware that they qualify for the program.
A temporary waiver for the program expires October 31, 2022. To learn more, and to apply, visit PSLF.gov.
How do I fend off scams related to loan forgiveness?
Legitimate lenders or loan service organizations will not call you about your loans or charge you a fee to get your loan forgiven faster. Scammers will. If you receive such a call, you can report it to the Federal Trade Commission’s Report Fraud webpage.
What’s the best way to receive updates on the loan forgiveness procedures?
If you know for sure that the US Department of Education has your income data, you may be part of the 8 million people whose loans will be automatically forgiven. But a simple application for loan forgiveness will be available before the end of the year. Borrowers are urged to sign up here to receive updates from the Department.
What should I do today?
It’s important to note that many of the details of the loan forgiveness have yet to be worked out, with more information coming from the Department of Education by the end of the year.
“This is a long race, and the president just fired the gun,” Buchanan said. “It’ll be some time before we cross the finish line.”
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Tina Kelley may be reached at [email protected].