Since its announcement in August, the historic Biden student forgiveness program has garnered reactions nationwide. And whether you have been on the yay or nay campaign for this program, it is finally coming into action this month as borrowers will be able to apply. According to the US Education Department, a simple loan application form was reported to be available early October 2022 is now live. Applicants can start sending in their applications, and submissions will continue until 31st December 2023. Those hoping to receive relief on their student loans as soon as repayment resumes have until 15 th November this year to send their applications.
Although income caps will apply to determine who qualifies, the loan will help an average of 37 million borrowers. The program will cover upto $10,000 for borrowers on federal student loans and upto $20,000 for the recipients of the Pell Grant. But the big question is: how will one apply? Applicants will access online forms which are available in both Spanish and English from studentaid.gov. It is fast, it is easy and one can access it mobile or website.
Meanwhile, here is what you can do;
- Log into your accounts and update your contact information. It will allow your loan servicer to reach out to you with cancellation updates easily.
- Contact your loan servicer about the loan repayment process.
- Subscribe to the Department of Education newsletter for updates on the application.
How Will The Student Debt Relief Plan Work?
The Department of Education continues to provide more information on how the program will work, and recently they have established how the relief will apply. Because many borrowers are juggling multiple loans, the cancellation will occur in the following priority.
- Defaulted loans: Top priority list will be any loan the borrowers have defaulted.
- Highest interest rate loans: These will come next if you are dealing with high-interest loans.
- Loan type: Cancellation of unsubsidized loans will come next before subsidized loans.
In some cases :
- If the loans are the same (unlikely), the most recent loan will get priority; however, if the timeline does not differentiate, those with the lowest balance come first.
- If the borrower’s balance is below the eligible relief amount, it will be fully paid. Refunds will only apply to repayments made during the pandemic.
Our Two Cents
The long-discussed student loan forgiveness plan is here, and as hoped, many borrowers will receive significant relief on their student debt. Those whose balance will resume repayments next year can expect to pay less on monthly repayments. With this financial breather, borrowers can direct funds to reduce debts or invest the money in other projects.