Following President Joe Biden’s announcement canceling student loan debt of up to $20,000 for specific borrowers, the U.S. Department of Education said applications for relief under the plan should be submitted by Nov. 15.
Department officials said they’ve made the application process simple, and if borrowers fail to apply by Nov. 15, they’d still have until the end of 2023 to file for forgiveness.
However, by waiting until after Nov. 15, borrowers risk having to resume payments after the federal pause in repayment ends on Dec. 31.
Biden said it’s vital for the more than 43 million eligible borrowers to take advantage of the loan forgiveness plan.
“All this means people can start to finally crawl out from under that mountain of debt to get on top of their rent and utilities, to finally think about buying a home or starting a family or starting a business,” Biden stated.
And while earlier reports revealed that about 13 states could still tax borrowers on the amount of debt forgiven, Mississippi and Virginia are the latest to come off that original list as officials said they would refrain from levying taxes on individuals who receive loan forgiveness.
How do you know if you’re eligible for debt cancelation? Here are the criteria set forth by the Department of Education:
- Your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households)
- If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt cancellation.
- If you did not receive a Pell Grant in college and meet the income threshold, you would be eligible for up to $10,000 in debt cancellation.
What does the “up to” in “up to $20,000” or “up to $10,000” mean?
- Your relief is capped at the amount of your outstanding debt.
- For example: If you are eligible for $20,000 in debt relief but have a balance of $15,000 remaining, you will only receive $15,000 in relief.
What do I need to do to receive loan forgiveness?
- Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.
- If the U.S. Department of Education doesn’t have your income data, the Administration will launch a simple application available by early October.
- Please sign up on the Department of Education subscription page if you want notification of when the application is open.
Once borrowers complete the application, they can expect relief within 4-6 weeks.
Everyone is encouraged to apply, but there are 8 million individuals for whom the Education Department has data and who will get the relief automatically.
Borrowers are advised to apply before Nov. 15 to receive relief before the payment pause expires on Dec. 31, 2022.
The Department of Education will continue to process applications as they are received, even after the pause expires on Dec. 31, 2022.