President Joe Biden’s administration announced plans Aug. 24 to implement a student loan forgiveness program that could erase up to $20,000 in debt for borrowers, but not every borrower is subject to debt relief.
Federally owned student loans are the lone qualifiers, while private student loans and higher-income borrowers are excluded from the plan.
Individuals who make less than $125,000 per year, or heads of household who make less than $250,000, will be forgiven of loans up to $10,000.
Those who received a federal Pell Grant while in college are eligible to receive up to $20,000 of their loans forgiven.
Here’s what else you need to know about student loan forgiveness:
Are defaulted loans eligible for forgiveness?
Yes, defaulted loans are included in the forgiveness program, even for those who have a remaining balance on their loans. The Department of Education will have a “Fresh Start” initiative in place as soon as January 2023 as an opportunity for people to get out of default.
I’m a current student in college. Am I eligible?
Yes, some current students still enrolled in school are eligible.
Eligibility for those who filed as independents on their Free Application for Federal Student Aid (FAFSA) is dependent upon the individual’s household income.
Am I eligible if I’m a parent?
If your income falls short of the income threshold of $125,000, you are eligible. Even parent borrowers with federal parent PLUS loans for multiple children are only eligible for up to $20,000 in full forgiveness.
How would I know if a received a Pell Grant?
Information about what loans and grants you received is available at studentaid.gov.
Does student debt from graduate school qualify?
Yes, you’re eligible if you meet the income threshold.
• Oct. 1 marks the day the student loan forgiveness applications should be available — no later than the first week of the month.
• Oct. 31 is the expiration day for the Limited Public Service Loan Forgiveness (PSLF) Waiver. PSLF is a student loan forgiveness program for borrowers who devote their careers to nonprofit or governmental work. Under the Limited PSLF Waiver, rules governing “qualifying payments” were relaxed.
• Nov. 3 is the hearing on the final approval of Borrower Defense to Repayment Settlement, which provides federal student loan forgiveness for borrowers who were misled or defrauded by their schools.
• Dec. 31 marks the end of the student loan pause. Borrowers should anticipate returning to repayments as early as January 2023.
Indiana will tax loan forgiveness
The Indiana Department of Revenue confirmed Sept. 6 that Indiana will levy income tax on those who participate in the loan forgiveness program at a rate of 3.23%. This means an individual who receives the $10,000 forgiveness amount could be liable for state and county income taxes. Those who qualify for the full loan discharge could be taxed more.
Contact staff writer Levi Jackson at 317-762-7854 or email email@example.com. Follow him on Twitter @posterboylevi.