Student Loan Forgiveness Update: New Details on Eligibility Requirements for Relief

The plan, which is expected to benefit more than 30 million borrowers, would cancel some or all of their student debt for:

1. Borrowers who owed more than they owed when they started repaying
2. Borrowers who started repayment at least 20 years ago
3. Borrowers who would be eligible for debt forgiveness through programs such as public service forgiveness or income-based repayment, but have not yet applied
4. And borrowers who attended schools that left them with too much debt relative to their income after graduation.

The emails sent last week also said borrowers should opt out of the relief through Aug. 30 by contacting their loan servicers. They can choose to opt out for a number of reasons, including to avoid potential state tax liabilities.

In addition to the emails, the department recently updated its federal student aid guidance with more information about eligibility requirements for this relief. Specifically, the department said that only borrowers who have “begun repaying at least one of their loans at the time debt relief is applied would be eligible for forgiveness of the loan(s) currently in repayment.”

This means that borrowers with federally subsidized or unsubsidized loans are considered to have begun repaying their loans once their grace period ends, typically six months after they graduate. Borrowers with PLUS loans are considered to have begun repaying their loans when their loans are fully disbursed.

Once the department finalizes its rules, it will begin implementing the relief in the fall, and unless a borrower wants to opt out, they don’t need to take any action to qualify.

For borrowers enrolled in an income-driven repayment plan at the time of relief, if they earn less than $120,000 per year individually or $240,000 as a married couple filing jointly, the amount of their current balance that is greater than their original balance will be forgiven under the proposed rule.

Borrowers who are not enrolled in an income-driven repayment plan will be eligible for assistance of $20,000 or the amount of their current balance above what they originally borrowed, whichever is lower.

As the department continues to move forward with finalization, the relief measure will likely face legal challenges that could halt or block the plan.

Are you hoping to benefit from Biden’s student loan forgiveness plan? Will it influence your vote in the election? Share your story with this reporter at [email protected]Me.