Live Updates: Student Loan Forgiveness Application Opens

Federal student loan borrowers can now apply for up to $20,000 in debt forgiveness, thanks to a new plan announced by President Joe Biden in late August.

The administration officially unveiled the app on Monday, after a short “beta period” over the weekend where its team assessed whether adjustments were needed.

Not all student loan borrowers are eligible for debt discharge – only federal student loans and private student loans are excluded.

Where can you find the app?

You can complete a short application at:

What kind of federal loans are beneficial?

There are many types of federal student loans and not all are eligible for assistance. Federal Direct Loans, including subsidized loans, unsubsidized loans, parent PLUS loans and graduate PLUS loans are eligible.

But federal student loans guaranteed by the government but held by private lenders are ineligible unless those borrowers apply to consolidate those loans into a direct loan by September 29.

The Department of Education initially said these private loans, many of which were made under the former Federal Family Education Loan program and Federal Perkins Loan program, would be eligible for one-time forgiveness, but six Republicans backtracked in September. Major states sued the Biden administration, claiming that private loan forgiveness would financially hurt states and student loan servicers.

Defaulted Family Education Loans and defaulted Perkins loans are still eligible for debt relief even though they are private.

What year is the income threshold based on?

Eligibility is based on a borrower’s adjusted gross income for the 2020 or 2021 tax year. Adjusted gross income may be less than your total pay because it takes into account tax deductions and adjustments, like contributions to a 401(k) retirement plan.

Will I have to pay tax on the amount of canceled debt?

Borrowers will not have to pay federal income tax on student loan debt forgiveness, thanks to a provision of the American Rescue Plan Act. Congress was approved last year. But some borrowers may have to pay state income tax on the amount of debt forgiven. There are a few states that tax paid off debt unless state legislative or administrative changes are made in advance, according to the Tax Foundation.

Are current students eligible for forgiveness?

Yes, some current students are eligible. Eligibility for borrowers who have filed a Free Application for Federal Student Aid, known as The FAFSA, as an independent, will depend on the individual’s household income. Eligibility for borrowers enrolled as dependent students, generally under the age of 24, will depend on their parents’ income in 2020 or 2021.

What about grad school debt?

Yes, if your income meets the eligibility threshold.

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