Biden’s student loan forgiveness request is coming soon. Here’s what you need to know

By on October 4, 2022 0

By Katie Lobosco, CNN

The application for President Joe Biden’s student loan forgiveness plan is expected to go live this week.

Announced in late August, the plan will provide federal student loan forgiveness to millions of low- and middle-income borrowers.

Individuals who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who earned less than $250,000 per year in those years will see up to $10,000 of their federal debt from canceled student loan.

If an eligible borrower also received a Federal Pell Grant while enrolled in college, they are eligible for debt forgiveness of up to $20,000.

In addition to direct federal loans used to pay for an undergraduate degree, federal PLUS loans taken by graduate students and parents may also be eligible if the borrower meets income requirements.

Amid mounting legal challenges to the student loan forgiveness policy, the Biden administration last week announced last-minute changes to the program. Borrowers are still awaiting the latest details on the policy.

The Department of Education regularly updates the Federal Student Aid website with information about the pardon program.

Here’s what we know so far:

How to register

The app has yet to be released, but the Biden administration has announced it will be released in October.

The online application will be short, according to the Ministry of Education. Borrowers will not need to upload any supporting documents or use their Federal Student Aid ID to submit the application.

“Once you submit your application, we will review it, determine your eligibility for debt relief and work with your loan officer(s) to process your relief. We will contact you if we need additional information from you,” the department said in an email to borrowers last week.

Borrowers will have over a year to apply. The deadline will be December 2023.

To be informed of the official opening of the process, register on the subscription page of the Ministry of Education.

Last minute eligibility change

The Biden administration reduced eligibility for the program last week as it faces growing legal challenges to the policy.

The program will now exclude borrowers whose federal student loans are guaranteed by the government but held by private lenders. The administration said the change could affect about 700,000 people.

The Department of Education initially said these loans, many of which were made under the former Federal Family Education Loan Program and the Federal Perkins Loan Program, would be eligible for the Forgiveness Action. only as long as the borrower consolidated its debt in the federal direct lending program.

But the agency backtracked after six Republican-led states sued the Biden administration, arguing that canceling private loans would hurt states and student loan managers financially.

Now, private federal student loans must have been consolidated by September 29 to be eligible for debt relief.

Borrowers can withdraw from the program

The White House clarified last week that borrowers will be able to opt out if they do not want to receive debt forgiveness.

The Biden administration’s announcement came hours after a borrower filed a lawsuit, arguing he would be required to pay state taxes on the canceled amount — an expense he would otherwise avoid.

According to the Tax Foundation, a handful of states can tax the debt discharged under Biden’s plan if state legislative or administrative changes are not made first.

Ongoing legal challenges

There are currently at least three major lawsuits aimed at stopping the Biden administration from implementing its plan to cancel student loans.

Republican states are leading the charge. In addition to the lawsuit filed by six Republican-led states that say they could be financially impacted by the pardon plan, Arizona Attorney General Mark Brnovich also filed a lawsuit last week.

Brnovich, a Republican, argues that the policy could reduce Arizona’s tax revenue because the state code does not consider loan forgiveness taxable income, according to the lawsuit. The complaint also argues that the pardon policy will harm the ability of the attorney general’s office to recruit employees. Currently, its employees may be eligible for the federal civil service loan forgiveness program, but some potential job applicants may not consider this a benefit if their student loan debt is already forgiven, according to the lawsuit.

A federal judge has already dismissed the claim in the third trial – from a borrower who sued arguing he would incur a larger tax bill as a result of loan forgiveness. The plaintiff, a public interest attorney at the Pacific Legal Foundation, has until October 10 to file a revised complaint.

How much will the program cost?

The nonpartisan Congressional Budget Office said in a report released last week that student loan forgiveness could cost $400 billion, but noted that those estimates are still “highly uncertain.”

The Biden administration argues that the CBO’s cost estimate must be considered over a 30-year period and released its own analysis two days later. He said the program will cost an average of $30 billion per year over the next decade and $379 billion over the course of the program.

Beware of scams

The Department of Education is warning borrowers of student loan forgiveness program scams that demand payment in exchange for help with debt relief.

“Be sure to only work with the U.S. Department of Education and our loan services, and never reveal your personal information or account password to anyone,” he said. stated in an email to borrowers.

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CNN’s Tierney Sneed contributed reporting.