Biden’s student loan forgiveness is coming soon. Here’s what you need to know


Washington
CNN

A request for President Joe Biden’s student loan forgiveness plan is expected to be launched as soon as this week.

Announced in late August, the plan will provide federal student loan forgiveness to millions of low- and moderate-income borrowers.

Individuals who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who earned less than $250,000 a year in those years will have their federal student loan debt forgiven.

If a qualified borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 in debt forgiveness.

In addition to federal Direct Loans used to pay for an undergraduate degree, federal PLUS loans borrowed by graduate students and parents may also be eligible if the borrower meets income requirements.

In the face of mounting legal challenges to the student loan forgiveness policy, the Biden administration announced some last-minute changes to the program last week. Lenders are still awaiting final details on the policy.

The Department of Education regularly updates the Federal Student Aid website with information about the forgiveness program.

Here’s what we know so far:

The app hasn’t been released yet, but the Biden administration has said it will be out sometime in October.

The online application will be short, according to the Department of Education. Borrowers will not need to upload supporting documents or use their federal student aid ID to submit their application.

“After you submit your application, we’ll review it, determine if you’re eligible for debt relief, and work with your loan servicer to process your relief. We’ll contact you if we need any additional information from you,” the department told a lender last week.

Loans will have more than one year to apply for. The deadline will be December 2023.

To be notified when the process officially opens, sign up on the Department of Education’s subscription page.

The Biden administration reduced eligibility for the program last week amid mounting legal challenges to the policy.

The program will now exclude federal student loans guaranteed by the government but private lenders. The administration has said that this change could affect around 700,000 people.

The Department of Education initially said these loans, many of which were made under the former Federal Family Education Loan program and Federal Perkins Loan program, would be eligible for temporary forgiveness while borrowers consolidate their debt. Federal Direct Loan program.

But the agency reversed course after six Republican-led states sued the Biden administration, arguing that forgiving private loans would financially hurt states and student loan servicers.

Now, private federal student loans must be consolidated by September 29 to be eligible for debt relief.

The White House clarified last week that borrowers will have a choice if they don’t want to receive debt forgiveness.

The Biden administration’s announcement came hours after a borrower sued, arguing it would be forced to pay state taxes on the canceled amount, an expense it would have otherwise avoided.

There are only a handful of states that tax debt forgiven under Biden’s plan unless state legislative or administrative changes are made beforehand, according to the Tax Foundation.

There are currently at least three significant lawsuits aimed at implementing the Biden administration’s student loan forgiveness plan.

Republican states are leading the charge. In addition to the lawsuit filed by six Republican-led states that say the pardon plans could hurt them financially, Arizona Attorney General Mark Brnovich also filed a lawsuit last week.

Brnovich, a Republican, has argued that the policy could reduce Arizona’s tax revenue because state code does not count loan forgiveness as taxable income, according to the lawsuit. The complaint also says the amnesty policy will hurt the attorney general’s ability to hire staff. Its employees may currently be eligible for the federal Public Service Loan Forgiveness program, but some job candidates may not see it as a benefit if their student loan debt is already canceled, the lawsuit says.

A federal judge has already denied the request in the third case, from a borrower who sued on the grounds that the loan forgiveness would have resulted in a higher state tax bill. The plaintiff, a public interest attorney for the Pacific Legal Foundation, has until Oct. 10 to file a renewed lawsuit.

The nonpartisan Congressional Budget Office said in a report released last week that student loan cancellation could cost as much as $400 trillion, but noted that those estimates are still “very uncertain.”

The Biden administration says the CBO’s cost estimate should be viewed over a 30-year period and came out with its analysis two days later. He said the program will cost an average of $30 trillion a year over the next decade and $379 billion over the course of the program.

The Department of Education is warning borrowers about scams related to the student loan forgiveness program that require payment in exchange for debt relief assistance.

“Make sure you only work with the US Department of Education and our loan servicers, and never share your personal information or account password with anyone,” he said in an email to lenders.