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How much debt is being canceled?
Have I received the Pell Grant?
There’s a good chance you’ll get some money as part of your college financial aid package: Of the estimated 43 million borrowers who would benefit from the administration’s forgiveness plan, more than 60 % are Pell Grant recipients, according to the White House.
If you are not sure if you will receive your Pell Grant as part of your financial aid package, you can check your account on studentaid.gov. On the main page of your account, there is a section titled “My Aid.”
Alternatively, you can check with the financial aid office of the university you attended to see if they can provide that information to you, says Kantrowitz.
Who is eligible?
The relief will be limited to borrowers earning less than $125,000 per year, or couples or heads of households earning less than $250,000.
Review your recent tax returns to confirm your earnings have fallen below those thresholds in 2020 or 2021 (will work). The U.S. Department of Education will consider your so-called adjusted gross income, or AGI, to be different from your gross salary.
To claim your AGI for 2020 and 2021, look for line 11 on the front page of your tax return, called Model 1040.
Which loan is eligible?
The big picture, the vast majority – about 37 million borrowers – will qualify for forgiveness based on their loan type (and then as long as they are also below the income limit), because Their debt falls under the so-called Federal William D. Ford Direct Loan Program. That includes Direct Employee Loans and all Direct Subsidized and Unfunded Federal Student Loans. Under the Direct program, Parent Loan Plus and Grad Loan are also eligible for assistance.
Then it gets more complicated.
At first, the Department of Education said that any loans it held would be eligible. That means about 5 million borrowers with a commercially held Federal Family Education Loan (FFEL) could have been excluded. These borrowers are also excluded from the pandemic-era payment pause that is still in effect.
However, the Department is now saying that it is looking to work with private lenders to ensure that federal commercial student loan borrowers can also benefit from loan forgiveness. things, according to a spokesperson.
These borrowers will have more than a year to apply for the relief following the government’s application for student loan forgiveness, and they do not need to take any action now, the spokesperson said.
If you want to make sure you qualify, you can transfer your loan now to the Direct Program by calling your servicer or visiting StudentAid.gov website. You will want to fill in “Federal Direct Consolidation Loan Application. “
All private student loans are excluded from the president’s plan.
What if I owe less than forgiven?
When does the loan expire?
Student loans after June 30, 2022, will not be included in the relief.
Do I have to do anything to be forgiven?
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The Education Department said it will launch an app in October in which borrowers can enter their income data and request a loan forgiveness. Borrowers can register now on their website to stay updated about the process.
The department also said it had income information for nearly 8 million borrowers because they were enrolled in an income-based repayment plan that requested the data.
These people can be canceled automatically.
Does loan forgiveness trigger taxes?
Student loan forgiveness will not trigger a federal tax bill.
That’s because the American Rescue Plan 2021 worked student loans are tax free through 2025 – and the law also includes Biden’s pardon, according to a flyer from the White House.
However, you can still get caught up in state taxes, said Kantrowitz. Although some states have said they will not tax the relief, some may continue to do so.
The amount “could be equivalent to a few student loan payments,” Kantrowitz said.
If you’re unsure, contact your local tax professional for an estimate before filing your state tax return.
How do I make sure I really get forgiveness?
Experts recommend taking a picture or screenshot of your current student loan balance. That way, you can guarantee that it will drop to the correct amount once the forgiveness occurs.
What is the timeline here?
A spokesperson for the Department for Education said it could take about eight weeks after all necessary information is available from borrowers until their debt is released.
The deadline to apply for forgiveness will be December 31, 2023.
Can forgiveness overcome a legal challenge?
It can.
Although no lawsuits have been filed yet, GOP attorneys general from states like Arizona, Missouri, and Texas, as well as Senators Ted Cruz, R-Texas, and those with connections to the conservative think-tank attorney, the Heritage Foundation, is considering their options when it comes to trying to prevent loan forgiveness, follow reported by The Washington Post.
“I’m afraid the uncertainty for borrowers in the meantime is substantial,” The Laurence . tribea Harvard law professor.
The matter can be referred to the Supreme Court. Meanwhile, borrowers are still encouraged to apply for relief.
What’s going on with the payment pause?
In addition to Biden’s announcement about student loan forgiveness, he said he would extension of payment pause for federal student loans through December 31. Payments will resume in January.
This is the seventh extension of the pandemic relief policy started under the Trump administration and it will probably be the last one.
– CNBC’s Sarah O’Brien and Kate Dore contributed reporting.
What will student loan forgiveness mean for you? If you are willing to talk about a story, please email me at annie.nova@nbcuni.com
