You Owe $10,000 Less on Federal Student Loans, Here’s What to Do Next

Soon, you’ll have $10,000 or more in student debt canceled. 

If you’re struggling with a student loan, you can apply for as much as $10,000 in loan relief according to the recently announced forgiveness plan. Also, President Biden extended the pause on loan repayment to New Year’s Eve. Therefore, you can request a refund of any loan repayment you made during the moratorium. 

While the Department of Education may forgive your debt automatically, most people must fill out an application form. Read on to learn more about the application or eligibility. 

Check Student Loan Debt Forgiveness Eligibility

In his plan, President Joe Biden has ordered the Department of Education to cancel $10,000 for individuals earning less than $125 per annum. The department will cancel the same amount for family heads or married borrowers earning less than $250,000 per year. What’s more, students who received federal Pell Grants will be eligible for up to $20,000 in relief. 

Fill Out Application for Debt Forgiveness

Before applying for student loan debt forgiveness, you must ensure that the Department of Education has your information. Usually, the department has income information for most borrowers enrolled in an income-driven repayment plan (IDR). In this case, it will automatically cancel your debt without input from you. 

If you’re yet to submit your information, you must fill in a federal form required by the department of education to cancel your debt. First, visit the StudentAid.gov site and create an account. If you already have an account, ensure that every information provided is updated. You don’t want the department to skip your name due to outdated and unreachable contact details. It’s also recommended that you sign up for text message notifications to receive relevant information timely. 

When Will the Debt Forgiveness Application Open

The National Economic Council informs the public on all matters concerning student debt forgiveness. In a recent press briefing, the council’s Deputy Director assured students that the application would go live in October. He also assured eligible borrowers that they’d receive the relief within a month of completing the application. So, you have until around early November to apply for the relief to ensure it matures before the Dec 31 deadline. 

If you don’t want to miss out on the application, sign up on the Department of Education subscription page. Check the box beside “Federal Student Loan Borrower Updates” to receive all updates regarding the loans via email or text message. 

See Whether You Can Afford the Payments Come January

If the forgiveness does little to salvage you from financial crises, consider other plans, such as the IDR that restructures your payments depending on your current income. The Federal Student Aid site has different IDR plans for you. 

If you have private student loans not covered by the federal debt forgiveness plan, consider consolidating or refinancing them based on your credit. 

Do whatever it takes to ensure you don’t default on your loans. This may mean applying for additional forbearance or deferment but beware of any accruing charges on the outstanding balance.

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