By: Zack Friedman
Do You Qualify For $8.7 Billion Of Student Loan Forgiveness?
Do you qualify for $8.7 billion of student loan forgiveness?
Here’s what you need to know.
If you have followed the latest student loan headlines, you may know that President Joe Biden has cancelled $8.7 billion of student loans since becoming president in January. This includes a major announcement this week to cancel $5.8 billion of student loans in Biden’s single largest act of student loan cancellation. This begs the question: Do you qualify for this student loan cancellation? Let's set the record straight.
Student loan cancellation: who qualifies
Biden has enacted targeted student loan cancellation directed at specific groups of student loan borrowers. Targeted student loan cancellation is different than wide-scale student loan cancellation, the latter of which helps most or all student loan borrowers. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) want Biden to enact wide-scale student loan cancellation of up to $50,000 of student loans. To date, however, there has been no wide-scale student loan cancellation. Biden instead has focused on student loan cancellation for two existing major constituencies of student loan borrowers. This student loan cancellation is in addition to the $60 billion of student loan cancellation that student loan borrowers will have received through student loan relief made possible under the Cares Act, the $2.2 trillion stimulus package, including the four extensions by Biden and President Donald Trump.
Total and permanent disability
The first constituency is student loan borrowers with a total and permanent disability. Biden cancelled $5.8 billion of student loans for more than 300,000 student loan borrowers this week. To qualify for this federal student loan forgiveness, you must have a total and permanent disability, which prevents you from earning income and paying student loans. This student loan discharge is automatic. To qualify, your name will appear on a data match between the U.S. Department of Education and the U.S. Social Security Administration or between the U.S. Department of Education and the U.S. Department of Veteran Affairs.
Borrower defense to repayment
The Biden administration has now cancelled $1.5 billion of student loan debt under borrower defense to repayment rule. Borrower defense to repayment is a federal regulation that began under the Obama administration that allows you to get student loan cancellation if you were misled or defrauded by your college or university. Borrower defense to repayment can result in total student loan cancellation or partial student loan cancellation. Importantly, student loan cancellation under borrower defense to repayment only applies to Direct Loans. Therefore, borrower defense to repayment doesn’t apply directly to FFELP Loans (Federal Family Education Loan Program) or Perkins Loans. This isn’t a surprise because student loan cancellation doesn’t apply to everyone. That said, you can consolidate these student loans into a Direct Consolidation Loan, which would then qualify for student loan cancellation under borrower defense to repayment.
Student loan cancellation: how to apply
To apply for these specific types of student loan cancellation, there has traditionally been an application and other requirements. The Biden administration is working to streamline the process so that more student loan borrowers who qualify can get automatic student loan cancellation. For example, student loan borrowers who qualify for a total and permanent disability had to complete an application, submit income information and undergo a three-year monitoring period. The Education Department plans to eliminate the application and monitoring period during the negotiated rule-making process that will commence in October.
How do you apply for student loan cancellation?
If you don’t qualify for a total and permanent disability (which most student loan borrowers do not), you may wonder if you will ever qualify for any student loan cancellation. For example, you may be asking: Did student loan cancellation get cancelled? It may feel that way if you’re hoping for wide-scale student loan cancellation, but it hasn’t happened. While the Education Department has already cancelled student loans for student loan borrowers who qualify under the borrower defense to repayment, you can still apply for student loan cancellation by completing the Application For Borrower Defense to Loan Repayment. The application is available both through the U.S. Department of Education and your student loan servicer. The application takes approximately 30 minutes to complete. You will need your Federal Student Aid (FSA) ID, your school name and program of study, your enrollment dates, and any documentation to support your claim.
What are the requirements for student loan cancellation?
To get student loan cancellation through the borrower defense to repayment rule, you must prove:
- you borrowed federal student loans to attend a college or university;
- you believe that your college or university intentionally misled you or engaged in other misconduct;
- you experienced specific financial harm as a result; and
- you can prove that your college or university violated a state law related to your student loans or to the educational services that were provided.
Here are some valid reasons why you might qualify for student loan cancellation under borrower defense to repayment: false promises from your college or university about the cost of your education, accreditation of the school, employment prospects, ability to transfer credits, or your school closed while you were enrolled. That said, you can’t make a valid claim for borrower defense to repayment because you didn’t land your dream job or don’t earn as much income as you hoped.
Biden student loan forgiveness: what if you don’t qualify
There’s a strong chance that you weren't included in the student loan cancellation that Biden has enacted to date. In aggregate, approximately 500,000 student loan borrowers have received federal student loan forgiveness. In comparison, the latest student loan debt statistics show that there are approximately 45 million student loan borrowers. How do you get student loan cancellation? It’s possible that Biden enacts wide-scale student loan cancellation, but chances are he will continue to focus on targeted student loan cancellation instead. Student loan cancellation can help more student loan borrowers, but that doesn’t mean that Biden will cancel everyone’s student loans. Biden’s student loan cancellation to date has been based on existing law. It’s unclear if Biden has legal authority to cancel student loans unilaterally without further authorization from Congress. The two best ways to get student loan cancellation are through an income-driven repayment plan and the Public Service Loan Forgiveness program. Both apply only to federal student loans, involve requirements, and can take 10 years (public service loan forgiveness) or 20 to 25 years (income-driven repayment plans). Most importantly, student loan relief has been extended until January 31, 2022. However, make sure you focus now on your strategy to student loan repayment. Don’t wait until January to tackle your student loans. Here are some popular options to pay off student loans and save more money:
- Student loan refinancing
- Income-driven repayment plans
- Public service loan forgiveness
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