Everything You Need To Know About Applying For Loan Forgiveness

In August 2022, President Biden finally announced his student loan debt forgiveness package, offering millions of Americans at least a slight, if not total, reprieve from crushing student debt.

The package provides forgiveness of up to $10,000 for borrowers with Federal Direct Loans and up to $20,000 for Pell Grant recipients. Single borrowers who earn $125,000 or more and households that earn $250,000 or more per year are not eligible for loan forgiveness. This cancelation will wipe out some debt for 43 million people. Twenty million of those people will have their debt completely canceled.

For many student loan advocates, this is a promising first step toward righting a financial wrong that has been crushing working families for decades.

But, so far, details as to how people will get their student loans forgiven, when they will, and what they should do in the meantime have been sparse on the ground, leaving many to wonder what exactly they need to do to take advantage of the program. Here’s what you need to know about applying for student loan forgiveness.

Am I Eligible for Student Loan Forgiveness?

Before applying for forgiveness, do a little digging to determine if you’re eligible. There are two main criteria:

• Income of less than $125,000 for individuals or $250,000 for married couples
• Your loan is a Federal Direct Loan and/or you received a Pell Grant

If you do not qualify for federal loan forgiveness or have a private loan, contact your loan servicer to find out what programs they offer to lower interest rates or consolidation to save yourself some money long-term. If you have a consolidated loan or an FFEL loan, read on.

I Consolidated Loans With My Spouse. Are We Eligible for Forgiveness?

Unfortunately for those who borrowed in the 1990s and early 2000s, consolidated spousal loans are not eligible for forgiveness. When the loans were consolidated, they became privately held loans, even if they were federal loans to start with.

Currently, there is no program that allows for the separation of these loans, even if you are no longer with your spouse.

The Senate passed a bill allowing those loans to be separated and refinanced into federal loans, but the bill has yet to pass through the House. If it does pass and become law, borrowers with consolidated loans will be able to separate their loans and apply for forgiveness, but only if it happens before the loan forgiveness window closes.

I Have An FFEL Loan. Do I Qualify For Forgiveness?

One of the earliest forms of lending for education, Federal Family Education Loans (FFEL), were commercially owned loans that were backed by the government. FFEL loans were phased out in 2010, but millions of Americans still carry their debt. Since the loans are technically commercially held, they do not qualify for forgiveness.

Recognizing that excluding FFEL loans would leave millions of borrowers out in the cold, the Department of Education announced that it was exploring solutions that would allow FFEL holders to apply for forgiveness, but no solution has been landed on yet. However, these loans can be consolidated into federal loans, making them eligible for forgiveness.

If you hold an FFEL loan, contact your loan servicer or go to StudentAid.gov to begin the consolidation process.

I Qualify For PSLF. Do I Qualify For Forgiveness?

Borrowers who qualify for Public Service Loan Forgiveness can also benefit from Biden’s loan forgiveness package. As part of a sweeping set of reforms introduced earlier this year, the beleaguered PSLF waiver was extended through October 31.

“Borrowers pursuing cancellation through PSLF or income-driven repayment (IDR) who also qualify for cancellation under the President's relief plan will benefit from the President's plan in the same manner as if they were not also pursuing cancellation through PSLF/IDR,” explained Berkman-Breen.

“Their balance will be written down by up to $10,000 — $20,000 if they were a Pell recipient. This is especially important for borrowers with higher balances, for whom [debt forgiveness] will not result in complete cancellation. For this reason, it is extremely important that PSLF-eligible borrowers take steps to access the PSLF Waiver before the October 31 deadline.”

When Can I Apply for Student Loan Forgiveness? How Do I Apply?

The Department of Education announced that the application for forgiveness will open in early October. Student loan borrowers can apply for forgiveness until December 31, 2023.

But! The Department of Education is encouraging borrowers to apply for loan forgiveness before November 15, 2022, to ensure their applications are processed before the current student loan payment pause ends on December 31st of this year. During the extended pause, loan payments were suspended, interest was not collected on those loans, and collections stopped on defaulted loans. When payments resume on January 1, 2023, none of those things will be true anymore.

If you’re worried you’ll miss the application launch announcement, you can set a reminder directly with the Education Department to receive an alert when the application opens. When the application is live, we will update this article.

What If I Paid Down My Loans During the Pandemic Payment Pause?

If you continued to pay down your student loans loans during the student loan payment pause to take advantage of the lack of accruing interest, and paid the balance down to under $10,000 or paid off your loan entirely during that time, you can request a refund on those payments to get your money back.

The refund will be deposited into your payment account, and your student loan balance will increase, allowing you to take full advantage of the loan forgiveness amount. You can then apply for loan forgiveness for the “outstanding” loan balance when the application portal goes live.

Just ensure you don’t request a refund amount that would make your balance exceed $10,000. Contact your loan servicer for more information on how to request a refund on payments made during the pause.

Do I Need To Pay My Loans Once Repayment Begins?

Borrowers whose forgiveness isn’t approved before repayment begins will likely need to pay their loans until forgiveness is approved.

“Our current understanding is that borrowers will have to pay on their loans once the payment pause resumes,” Winston Berkman-Breen, Student Borrower Protection Center Deputy Director of Advocacy & Policy Counsel, told Fatherly. “However, we are hopeful that the Department will move quickly on processing cancellation after the form borrower needs to use becomes available in October.”