Student loan forgiveness: Government offers glimpse of application for borrowers

The Education Department (ED) provided a first look at the student loan forgiveness application on Tuesday, but did not say exactly when the form would go live for borrowers to fill out.

However, it reiterated the release is still set for this month.

In a press briefing Tuesday, the ED provided images of the simple online form, which asks borrowers to provide their name, Social Security number, date of birth, phone number, and email. Borrowers won't need to upload any documents and they also don't need to log in with a Federal Student Aid (FSA) ID. To prevent fraud, all borrowers must attest to their eligibility under penalty of perjury and jail time.

The application will be available in English and Spanish on desktop and mobile. It will only be available on the government website, but the ED did not provide the link at this time.

An ED official said that borrowers should receive debt relief "in a matter of weeks" after completing the form. The department expects to process the majority of claims by mid-November before January payments resume.

If an applicant doesn't have a federal loan, they won't qualify for relief. If the applicant's information doesn't match up with the ED loan, the department will follow up and ask for additional information.

More than 40 million borrowers are eligible for student debt relief, which includes $10,000 in cancellation along with an additional $10,000 in loan forgiveness for Pell Grant recipients. Nearly 20 million borrowers could have their entire remaining balance forgiven, according to White House projections.

Here's what else you need to know about Biden's student loan debt forgiveness.

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Who qualifies for $20,000 in student loan debt forgiveness?

Borrowers who received Pell Grants and make less than $125,000 as individuals or less than $250,000 as married couples are eligible to receive $20,000 in student loan debt forgiveness. Your income is based on either your 2020 or 2021 federal tax return. It is expected that income will be based on adjusted gross income (AGI), but we are awaiting confirmation from ED.

What is a Pell Grant?

A Pell Grant is a federal grant to low-income undergraduates who have not yet earned a first bachelor’s degree with the greatest demonstrated financial need. Eligibility is determined from documentation provided on the free application for federal student aid, known as FAFSA. In 2020-21, approximately 6.4 million students received a Pell Grant with the average award of $4,166 and over 78% of recipients had family incomes of less than $40,000, according to the National Association of Student Financial Aid Administrators (NASFAA).

Who qualifies for $10,000 in student loan debt forgiveness?

Those who did not receive Pell Grants but make less than $125,000 as individuals or less than $250,000 as a married couple are eligible for $10,000 in student loan debt forgiveness. Your income is based on either your 2020 or 2021 federal tax return. It is expected that income will be based on adjusted gross income (AGI), but we are awaiting confirmation from ED.

Are current students with loans eligible for forgiveness?

Students currently enrolled in school with loans also can qualify for relief as long as their parents' income is below the eligibility cap for single or married filers. Loans must have been originated before July 1 to be eligible.

Which types of student loans are eligible for forgiveness?

Only federally backed student loans are eligible for forgiveness. Loans from private banks and lenders don't qualify — this includes federal loans consolidated with a private lender.

Both undergraduate and graduate direct loans are eligible for cancelation along with Parent PLUS loans taken out by parents or guardians.

Wisdom Cole posses for a photo following a press conference held to celebrate President Biden cancelling student loan debt on Capitol Hill on September 29, 2022 in Washington, DC. (Photo by Jemal Countess/Getty Images for We, The 45 Million)
Wisdom Cole posses for a photo following a press conference held to celebrate President Biden cancelling student loan debt on Capitol Hill on September 29, 2022 in Washington, DC. (Photo by Jemal Countess/Getty Images for We, The 45 Million)

As of September 29, 2022, borrowers with federal student loans not held by the Education Department are not eligible for debt relief by consolidating those loans into federal direct loans.

If you had FFEL and Perkins Loans not owned by the Education Department and applied to consolidate them into the federal direct loan program before Sept. 29, 2022, they are eligible for loan forgiveness.

If your loans are in default, use the Fresh Start Program to get them back in good standing.

How can I apply for student loan debt forgiveness?

Almost 8 million borrowers could be eligible to get relief automatically because their income data is already available to the Education Department. Those borrowers will be notified of automatic relief.

Everyone else must apply to certify income.

Applications will be available online sometime in October. Initially, the application will be available only online, but a paper version will be available later.

You have until the end of next year, December 31, 2023, to apply, according to FSA's latest FAQ update.

If you still have outstanding debt after loan forgiveness, it is highly recommended to complete the application before the end of this year to make sure your loan servicer recalculates your new balance and monthly payment when payments start in January.

What happens to any payments I made during the payment pause?

If you made payments during the federal student loan moratorium (beginning March 13, 2020), you can get a refund for payments made by contacting your loan service provider, according to the Federal Student Aid website.

Loans eligible for Biden's loan forgiveness
Loans eligible for Biden's loan forgiveness

Is this the same as the Public Service Loan Forgiveness (PSLF) program?

No. The Public Service Loan Forgiveness provides student debt forgiveness to those who have worked at least 10 years in public service jobs with federal, state, local, or certain non-profit organizations such as teachers, nurses, doctors, lawyers, and other professionals. The PSLF waiver expires October 31.

How can I stay updated on the student loan forgiveness application process?

Borrowers can get notifications when the application is available by signing up at StudentAid.gov/debtrelief.

What happens with my payments if I'm not eligible for forgiveness or the forgiveness doesn't cancel all my debt?

Biden also extended the pause or forbearance on federal student loan payments until December 31. It is not expected to be extended again. If you have debt remaining after loan forgiveness, your loan servicer will recalculate your new balance and monthly payment. Payments will resume in January 2023.

Is the forgiven student loan debt taxable?

Not on the federal level. This debt relief will not be considered taxable income for federal income tax purposes because of a provision in the American Rescue Plan passed in March 2021.

However, some states — like Arkansas, Minnesota, North Carolina, and Wisconsin — may consider it taxable income.

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Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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