When can borrowers expect student loan forgiveness under Biden’s new plan?
President Biden introduced an unprecedented student loan cancellation plan last month that will cancel $10,000 in federal student loans (or up to $20,000 in some cases) for eligible borrowers. But some questions remain about the timing of the succession.
Here’s what borrowers need to know.
Biden’s Student Loan Forgiveness Plan
Biden’s proposal uses executive authority to enact sweeping student loan forgiveness. Borrowers can get up to $20,000 in student loan forgiveness if they received a Pell Grant (a federal financial grant for low-income families that does not have to be repaid); other borrowers who did not receive a Pell grant can receive up to $10,000 in student loan forgiveness.
Federal student loans held by the government, including college loans and Parent PLUS loans, are eligible. FFEL program loans held by businesses are not automatically eligible, although the Department of Education recently announced updates on potential eligibility for FFEL loans. Private student loans are not eligible.
Borrowers must have earned less than $125,000 per year, or $250,000 per year if married, in 2020 or 2021 to qualify.
Automatic student loan forgiveness under Biden’s plan
The Department of Education said about eight million federal student loan borrowers can automatically receive student loan forgiveness, without having to submit a formal application. This includes borrowers who have previously sent recent income data to the Department of Education, either through submission of a FAFSA form or recent application or recertification for an income-based repayment plan. The Department of Education may use this income data to automatically grant loan forgiveness.
However, Education Ministry officials did not provide a specific timeline as to when these borrowers should expect to receive the relief. And officials encourage borrowers to submit an application anyway, even though the Department may already have their income data on file.
Application for Student Loan Forgiveness and Timing of Relief
The Biden administration said a formal application for student loan forgiveness for the new initiative should be available on StudentAid.gov in early October. Although few details have been released so far, the application should be a fairly straightforward document where the borrower can attest to their income.
Department of Education officials said they expect an application processing time of four to six weeks, which is pretty quick when it comes to federal student loan documents.
“When you submit your application for debt relief, you will see an online page confirming that your form has been submitted,” the Department for Education explains in published guidelines. “You will also receive a confirmation email from us, so make sure we have your most recent email address.”
When to Submit the Student Loan Forgiveness Application
Borrowers will have just over a year to apply for student loan forgiveness under the Biden plan once the application becomes available.
“You will have until December 31, 2023 to submit your application for student loan debt relief,” says the Department of Education.
However, senior Ministry of Education officials are encouraging borrowers to submit their applications by November 15, 2022, if they can. This way, the student loan forgiveness would be applied at the end of the student loan payment break on December 31, 2022.
The Department of Education expects 20 million borrowers to see their federal student loans completely eliminated as part of the initiative. Borrowers with remaining loan balances may be able to have their monthly payments recalculated based on the repayment of their lower balance.
Further Reading on Student Loans
Student loan borrowers should note these critical dates for loan cancellation and repayment
How Biden’s new income-based plan may work for student loan borrowers, and when to apply
Biden’s student loan forgiveness could be taxable in some states
If You’ve Been To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do