Student loan forgiveness: what you need to know
Student loan forgiveness is a hot-button topic right now. With the Biden administration’s latest announcement on their forgiveness plan, nearly 8 million borrowers are eligible for automatic loan forgiveness. Even more borrowers are likely eligible but will have to complete the forgiveness application to submit their income. We have the latest info on student loan forgiveness, how it affects you, and what you need to do next:
Know your loan
Before we begin with the current events of student loans, let’s take a minute to address those considering their first or newest student loans. It’s critical that you know what your loan means for you. You need to know the terms, the interest, how often payments need to be made, and other details that will make a financial difference to you later in life. Be familiar with your loans to avoid any surprises down the line. If you’re unsure what type of loans you’ve received, or if you’re unsure you’ve received any grants, including Pell Grants, you can log in to your account at studentaid.gov.
Research the differences
There are two types of student loans—federal and private. It may seem like an elementary concept, but too many students don’t realize which loan they have until they are already locked in. If you’re unsure, it’s okay—find someone at your school or a trusted colleague who can help you walk through the process. “Better late than never” definitely applies when it comes to learning about your loan—even though we think knowing the information ahead of time is even better than being late.
What is loan forgiveness?
The current administration has extended the student loan payment pause for a final time through December 31, 2022 and announced one-time student loan debt forgiveness. While not everyone qualifies, many of those in student loan debt may find their budget loosening as a result. The current loan forgiveness plan allows federal borrowers to receive up to $10,000 in forgiveness and Pell Grant recipients to receive up to $20,000 in forgiveness. This relief is limited to borrowers who make less than $125,000 per year or married couples (or heads of households) who make less than $250,000 per year.
Is my loan canceled?
Not necessarily—if you owe more than $10,000 (or more than $20,000 as a Pell Grant recipient), you are responsible for any additional amount you owe after the initial amount forgiven. The forgiveness plan provides some relief for the mounting student loan debt plus negates some effects of the pandemic, as many people found themselves unexpectedly without a job at some point over the last two years.
Does everyone get loan forgiveness?
Most federal loans are eligible for forgiveness. However, this does not mean that all hope is lost. If you struggle to make your private student loan payments, reach out to the company that provided your loan. Many offer programs or options that can give you some financial slack for a little while. Don’t get yourself into even more debt, though—be sure to verify the terms of your private loan options just like you would for the loan itself. If your monthly payments are too high, you can refinance or consolidate your private loans to lower your payment or have one manageable loan.
What about student loan relief?
Student loan relief is extended to December 31, 2022. After that, payments will resume. You have a few months to work things out, so take a look at your budget and determine how you can make those payments again as soon as the relief period ends.
How do I get loan forgiveness?
The application to receive student loan forgiveness will be ready by early October—you can sign up to receive updates on the form’s status. Be sure to have your information prepared before the application opens. Check that your income and loans qualify, and gather any records that might support your request. Federal student loan borrowers should aim to apply no later than November 15th. It will take around six weeks to get cancellation after applying for forgiveness, and you’ll want your balance to be eliminated or reduced before December 31st (when the payment pause expires).
If you’re not eligible for student loan forgiveness, or if you still owe a significant amount of money after part of your loans are forgiven, Georgia’s Own is here to help you gain control of your financial freedom. We offer the option to refinance or consolidate your federal and private loans into one monthly loan, giving you one manageable payment and excellent rates—and a quicker route to becoming debt free. Click here to get started today.