A new student federal loan forgiveness plan was recently announced that includes student loan forgiveness for millions of borrowers. With that being said, there are certain qualifications and specifications that come into play when finding out if you're eligible to be a part of this plan1.
Those with William D. Ford Federal Direct Loans earning less than $125,000 annually as an individual (the income cap is $250,000 per household) may qualify for debt forgiveness. Borrowers who meet that criteria may get up to $10,000 worth of debt forgiveness. If a Pell Grant is received, individuals may qualify for up to $20,000 in loan forgiveness.
What types of loans qualify?
If loans are qualified for the federal student loan payment pause, they're eligible for the loan forgiveness opportunity. Different types of federal Direct Loans qualify, as well, including graduate or parent PLUS loans and direct subsidized or unsubsidized loans. Most Perkins loans and Federal Family Education loans (FFEL) are ineligible for debt forgiveness (borrowers with this kind of debt who applied for a Direct Consolidation Loan before September 29, 2022, may qualify).
What type of education qualifies?
Direct Loans used for alternative certification as well as bachelor's degree programs may be eligible. This includes a community college, professional degree, and/or trade program.
How much debt will be forgiven?
The amount of debt forgiven depends on whether the borrower received a Pell Grant. Individuals who did receive that grant may receive up to $20,000 in debt forgiveness. For those who meet the income threshold requirements without receiving a Pell Grant, $10,000 worth of debt may be forgiven. However, if the student loan balance is less than the amount that a person qualifies for, the debt relief is capped at the amount of the outstanding debt.
Do you need to apply for debt forgiveness?
Borrowers may need to apply for debt forgiveness. If the Department of Education already has your income data for 2020 and/or 2021, your debt may be automatically forgiven. If that's not the case, individuals will have to submit their income information via an online application when it becomes available.
Beware of scams
Often times student borrowers may be contacted by companies claiming assistance with loan discharges, forgiveness, cancellation, or debt relief for a fee. Federal student loan borrowers never need to pay for assistance with their loans.
Students can sign up at the Department of Education subscription page to receive updates and notifications when the application is officially opened.
To learn more about financial aid available at Porter and Chester Institute (PCI), check out the information webpage for more information. For information about grants and scholarships at PCI, learn more here. You can also research additional information from the U.S. Department of Education on One-Time Student Loan Debt Relief.