Which student loans are not eligible for forgiveness?
President Joe Biden announced Wednesday that he is keeping his promise to help students get out of student loan debt. But it may depend on the type of loan, which means that some debtors will not get any relief.
“What are usually just technical differences could now determine whether or not a borrower qualifies for President Joe Biden’s unprecedented new plan to cancel hundreds of billions of dollars in federal debt,” as NRC reported.
The president said $10,000 in federal student loans for those with up to $125,000 in individual incomes or $250,000 for a household will be forgiven, while those who received Pell grants – the neediest students – could get up to $20,000.
A White House Fact Sheet said Pell Grant recipients make up more than 60% of the borrowing population – and the Department for Education estimates that around 27 million borrowers will qualify for $20 student debt relief. $000. He said the Pell Grants covered 80% of the cost of a college education for a low-income student, but the grants have not kept up with the costs and now only pay about a third, leaving students and parents low. income to borrow the rest.
CBS News reported that the typical Pell grant is around $4,600, which is well below the cost of college for one year.
The list of loans covered by the forgiveness plan includes loans from the federal William D. Ford Direct Loans Program – including Stafford Direct Loans and other direct-branded federal student loans, whether they were subsidized or not. Parent PLUS Loans and Grad Loans are eligible for debt relief under the Direct Lending Program.
That means borrowers who used federal loans to help pay for higher education may also qualify — all, of course, subject to income limits.
The Century Foundation notes Parent PLUS Loans borrowers have an average debt of $29,600 that parents incurred for their child’s education. And on average, parents still owe about 55% after 10 years of payments — “after 20 years, a whopping 38%” — due to higher interest rates and less favorable terms than other federal student loans. The report notes that “in 2015, 40,000 disabled or retired Parent PLUS borrowers had a portion of their Social Security benefits stripped after they defaulted on their loans.”
Since loan forgiveness only applies to loans held in some way by the U.S. Department of Education, those who have received student loans from private lenders, including banks and finance companies, are probably out of luck.
CNBC’s Annie Nova explains it this way: “The federal government began lending to students on a large scale in the 1960s. At the time, however, it did not provide student loans directly. Instead, it guaranteed debt provided by banks and nonprofit lenders, under what is now known as the Federal Family Education Loans (FFEL) program. This program was eliminated altogether in 2010, after lawmakers argued that it would be cheaper and easier to lend directly to students. Almost 10 millions people still hold FFEL loans.
Mark Kantrowitz, a higher education expert, told Nova that about half of those loans are held by the department and could therefore be forgiven, while half are held by commercial lenders. Incidentally, these non-government-held loans also did not receive a pandemic payment break.
Nova wrote that those with FFEL business loans can call their loan manager and consolidate them into the direct lending program, making them eligible for the discount.
Federal Perkins Loan Program loans that are held by the colleges, not the department, are also excluded.
All private student loans are excluded from the forgiveness program.
Both current and past students can apply for debt relief – as long as the loan was taken out before July 2022. Consolidation of ineligible FFEL and Perkins loans does not have to take place before this date, but experts have declared Check debtors should do so promptly.
Due to the provisions of the US bailout, student debt relief will not be considered income subject to income tax, the White House said.
More information about student debt relief is online at studentaid.gov, including where to sign up to be notified when relief requests may be submitted. Not everyone will need to apply either, as the Ministry of Education needs information on certain eligible people and will automatically apply for debt relief.