Written By Adam S. Minsky, JD
The Education Department is finalizing an application for its broad new student loan forgiveness initiative. It is working on the infrastructure to field millions of requests for loan forgiveness in the coming months. As the administration releases more details for borrowers on what to expect during the application process, officials warn borrowers to be wary of scammers trying to deceive borrowers or steal their information.
Here’s what you should know.
How Biden's new student loan forgiveness plan works
Under Biden’s sweeping new student loan forgiveness plan, the Education Department plans to eliminate up to $20,000 in federal student loan debt for close to 40 million borrowers.
Borrowers who received a Pell Grant can get up to $20,000 in student loan forgiveness, while those who did not can get up to $10,000. Single borrowers must have earned under $125,000 in either 2020 or 2021 to qualify, while married borrowers must have earned under $250,000.
All government-held federal student loans are eligible for relief. This includes the following, according to the Education Department:
- William D. Ford Federal Direct Loan (Direct Loan) Program loans including Stafford, Graduate PLUS, and Parent PLUS loans.
- Federal Family Education Loan (FFEL) Program loans administered by the Education Department or in default at a guaranty agency.
- Federal Perkins Loan Program loans held by the Education Department.
- Defaulted federal student loans (including Department-held or commercially-serviced Subsidized Stafford, Unsubsidized Stafford, Parent PLUS, and Graduate PLUS loans, as well as Perkins loans held by the Education Department).
As of last week, commercially-held FFELP loans in good standing no longer qualify for relief, even if consolidated into a Direct consolidation loan, unless the loans were included in a Direct consolidation application submitted prior to September 29, 2022.
The Education Department had originally advised that borrowers with commercially-held FFELP loans could qualify for relief if they consolidated those loans into a Direct consolidation loan. But it abruptly reversed course as the administration faces several legal challenges regarding the program.
Student loan forgiveness application should be available soon
The Biden administration has been notifying borrowers that an application for the student loan forgiveness initiative will be available in the coming weeks, if not sooner.
“You will hear directly from the Department of Education or Federal Student Aid when the application for debt relief is available,” said the Education Department in a blast email to borrowers this week.
Some borrowers whose income information is already on file with the Education Department (such as those who recently submitted an application for an income-driven repayment plan) may qualify for automatic student loan forgiveness without the need to submit an application.
“If you qualify for debt relief without needing to fill out an application, you will also hear from the Department or FSA directly,” says the Department.
The Biden administration has indicated that the application will be short and simple for borrowers who have to complete an application. Borrowers will not have to log in to any account, and they will not have to submit supporting documentation.
The Education Department anticipates a four-to-six-week turnaround time for applications. Borrowers will have until April 30, 2024, to apply.
Biden administration warns borrowers about student loan forgiveness scams
Due to the unprecedented nature of the student loan forgiveness initiative, as well as confusing eligibility criteria that are somewhat in flux in light of new legal challenges, the Biden administration is concerned that scammers may contact some borrowers.
In a blast email this week, the Education Department warned millions of borrowers to be careful of scammers. The Department advises borrowers:
- Don’t share your FSA ID or account information with anyone who contacts you, as the Education Department and federal student loan servicer will never ask for this information.
- Don’t give your personal or financial information to any unfamiliar caller.
- Don’t refinance your federal student loans into a private loan, as you would lose out on important federal student loan benefits, including the one-time student loan forgiveness initiative.
- Make sure your contact information is up to date with your current loan servicer and the U.S. Department of Education.
If a scammer has contacted you, you can report it to the Federal Trade Commission by visiting reportfraud.ftc.gov.
What's next for borrowers seeking student loan forgiveness
While the Biden administration is moving forward with a student loan forgiveness application, several pending legal challenges could pose a danger to the program.
One lawsuit, in particular, brought by a coalition of Republican-led states, could be a problem for the administration. A federal court has scheduled a hearing on October 12, 2022, on a request for a preliminary injunction.
If it's granted, the entire student loan forgiveness could be delayed or blocked — possibly for quite some time — while a legal battle over the program plays out. This court event is widely viewed as a key indicator as to whether or not the program will move forward this month.
Student loan borrowers should stay tuned.
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