May 24, 2024

How Student Loan Borrowers Can Take Part in Biden’s Latest Debt Relief

  • The Department of Education announced $39 billion in debt relief for more than 800,000 borrowers.
  • It is the result of a one-time account adjustment for income-based repayment plans.
  • More borrowers can still get relief when they reach the forgiveness threshold.

Thousands of student borrowers are being notified that their debt is being erased. It won’t be just them.

On Friday, President Joe Biden’s Department of Education announced that more than 800,000 student borrowers will receive $39 billion in debt relief in the coming months thanks to a one-time adjustment to accounts enrolled in an income-based repayment plan. This relief is automatic and the department said it will send emails to eligible borrowers who have “accumulated the equivalent of 20 or 25 years of qualifying months,” according to the press release.

Specifically, borrowers who will receive the first batch of notices in the Federal Education Loan for Families program — held by the Department of Education — have loans or federal direct loans that have met the required threshold for forgiveness, including payments during postponement or concession.

And, according to Federal Student Aid, federal borrowers who are not currently enrolled in an income-driven repayment plan can take advantage of this adjustment as long as they have made at least 20 years of qualifying payments.

Here’s what borrowers should know if they want to take advantage of the relief.

How to make sure your loans qualify

The account adjustment only applies to federal direct loans and FFEL loans held by the Department of Education. If borrowers have commercial student loans, they must apply for a Direct Consolidation Loan by the end of 2023 to take advantage of the adjustment.

How long borrowers must make payments before relief

Here is the repayment timeline for eligible loans:

  • Parent PLUS Loans: 25 years, or 300 months of payments
  • Undergraduate loans: 20 years, or 240 months of payments
  • Graduate loans enrolled in the PAYMENT repayment plan: 20 years, or 240 months of payments
  • Gradual loans not registered in PAYMENT: 25 years, or 300 months of payments.

What happens after the repayment threshold is met

If borrowers reach their qualifying payments before August 1, 2023, the Department of Education said it hopes to have their loans discharged before student loan payments resume in October. If borrowers reach their qualifying payments on or after August 1, the department will said “You’ll probably have to start making payments after the payment break ends. But don’t worry – you’ll get a refund for any payments over the number you need for forgiveness.”

“You can also choose to enter forbearance until your forgiveness is processed,” the department said. “But if you go into forbearance and haven’t reached 20 or 25 years of payments yet, you won’t get credit for the forbearance period and you’ll have to make additional eligible payments to achieve forgiveness.”

How to get a refund if a borrower overpays

When a loan reaches the repayment threshold, it automatically qualifies for forgiveness. Additional payments made on loans after qualifying for relief will be repaid back to whichever of the following dates is later: the date the borrower reached the required number of payments, the date the Department of Education for your loan, or the disbursement date for its consolidated loan.

Student loan servicers will notify borrowers when their loans are forgiven, and they will receive repayments in the same manner the borrower used to make payments. Refunds usually take two months or less to process.

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