Student-loan forgiveness preliminary application still open after judge issues temporary stay

By Sabrina Bates

MVP Regional News Editor

sabrina@magicvalleypublishing.com

The application portal for the Biden-Harris Administration’s student-loan forgiveness program opened up Friday, Oct. 14. The following Friday, the U.S. Court of Appeals for the 8th Circuit issued a stay on the program after an appeal was filed by Republican attorneys general in six states. Those states filing suit are Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. The stay means the Administration cannot act on issuing debt relief until the court makes a final decision. More than 22 million people have already applied for student loan forgiveness through https://studentaid.gov in the first week. Applications for eligibility are still being accepted through the website’s beta-testing form.

Visiting the web portal is the first step to determine eligibility for the loan program. The brief digital form requests only the following information - name and prior last name used if applicable, Social Security Number, birthdate, email address, cell phone number and verification or a signature for providing accurate information. The form is accessible through a computer or cell phone and available in English and Spanish.

Those who have created an online account through the studentaid.gov website should receive an email or text notification now that the application is available online.

The deadline to apply for student-debt forgiveness is Dec. 31, 2023. Borrowers are encouraged to apply for the relief before the COVID-19 pandemic, student loan administrative forbearance deadline of Dec. 31, 2022. President Biden announced he will not continue the pandemic-forbearance past Dec. 31, 2022, and encourages borrowers to apply for the student loan relief program by Nov. 15, 2022.

In August, the president’s administration announced student debt relief for low- and middle-income families across the country. As part of the student loan forgiveness program, up to $20,000 in debt relief is available for qualifying borrowers who received Federal Pell Grants and up to $10,000 in relief for those who did not receive a federal Pell Grant to attend school.

The relief program is only available to those who received student loans and grants through the U.S. Department of Education. Borrowers whose annual individual income was less than $125,000 (individual or married, filing separately) or $250,000 for households (married, filing jointly or head of household) in 2021 or 2020 are eligible for the debt relief.

Visiting the website, https://studentaid.gov, is the first step to determine eligibility for the loan program. The application will be available on the website in early October. The deadline to apply for student-debt forgiveness is Dec. 31, 2023. Those who have created an online account through the studentaid.gov website will receive an email or text notification when the application is available online.

The Department is warning people of potential scams that may arise in the loan-forgiveness process. Scams involve companies contacting people offering to get them a loan discharge, forgiveness, cancellation or debt relief for a fee. There are no fees associated with the government’s debt-relief program. Emails to borrowers will come from noreply@studentaid.gov.

Any current or former student who received a Federal Pell Grant is eligible to receive the $20,000 in federal debt relief. The additional $10,000 granted to Pell Grant recipients will be applied to eligible loans, such as undergraduate, graduate or parent loans. If a dependent student received a Pell Grant, up to $20,000 in debt relief will be applied to the student’s loan and not loans taken out by parents.

Those who received a Pell Grant prior to 1994 are still eligible for the federal debt-relief program, although their information will not be displayed on the Federal Student Aid website.

The following types of federal student loans with an outstanding balance as of June 30, 2022, are eligible for relief:

• William D. Ford Federal Direct Loan (Direct Loan) Program loans including subsidized, unsubsidized, Parent PLUS and Graduate Plus.
• Federal Family Education Loan (FFEL) Program loans held by ED or in default at a guaranty agency

• Federal Perkins Loan Program loans held by ED
• Defaulted loans (includes ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins loans held by ED)

Consolidation loans are eligible for relief, as long as all of the underlying loans that were consolidated were first disbursed on or before June 30, 2022. Defaulted loans through the U.S. Department of Education, federal student loans on pause and loans held through guaranty agencies are also eligible.

ED is assessing whether to provide relief to borrowers with privately-owned, federal student loans, including FFEL and Perkins Loans, and is discussing this with private lenders. In the meantime, borrowers with privately-held federal student loans can receive this relief by consolidating these loans into the Direct Loan program. FFEL Joint Consolidation Loans, often referred to as spousal consolidation loans, are not eligible for consolidation into the Direct Loan program under current law.

If an outstanding loan balance is less than the maximum debt relief a person is eligible for under this federal assistance, only the loan balance will be covered through the relief program.

If a loan balance remains after the federal debt-forgiveness amount is applied, monthly loan payments will be recalculated for the borrower.

Those who made payments during the pandemic pause and determined eligible for the debt-relief assistance will receive a refund if their payment amounts brought their balance below the granted debt-relief amount for those who did not pay off their loans in full.

For example, if a borrower eligible for $10,000 in relief had a balance of $10,500 prior to March 13, 2020; and made $1,000 in payments since then, bringing their balance to $9,500 at the time of discharge, the Department of Education will discharge the $9,500 balance, and send a $500 refund. Other borrowers can still receive refunds on voluntary payments made after March 13, 2020, by contacting their servicer. If someone consolidated his/her loan after March 13, 2020, refunds aren't available for any voluntary payments made prior to the consolidation.

Borrowers are eligible for debt relief regardless of whether they're in repayment, in school, or in grace, as long as they meet the income requirements and have eligible loans.

Debt relief will be applied in the following order for borrowers with multiple loans:

• Defaulted ED-held loans

• Defaulted commercial FFEL Program loans
• Non-defaulted Direct Loan Program loans and FFEL Program loans held by ED
• Perkins Loans held by ED

This student loan debt-relief assistance is not subject to federal income taxes.

One-time student loan debt relief will not be subject to federal income taxes. State and local tax implications will vary.

Visit StudentAid.gov to check eligibility status and update contact information.