September 14, 2022

2 Ways to Benefit From the New Student Loan Forgiveness Program, #114

12 minutes

Everyone is buzzing about the newly passed student loan relief program. The measure is estimated to help up to 43 million federal loan borrowers who will qualify for this debt relief. On this episode, I’ll go over the program and how it works, how to qualify, and the different ways you could potentially reduce your student loans.

You will want to hear this episode if you are interested in...

How much of my student loan debt can be forgiven? [2:17]
Qualifying for student loan forgiveness [3:22]
Exploring the logistics of the student loan relief program [5:47]
Is the loan forgiveness plan a sure thing? [10:15]

Meeting the criteria

The biggest question on every student borrower’s mind is how much of my debt can be forgiven with the new student loan relief program? For those who don't exceed the income cap, you'll qualify for up to $10,000 of traditional federal loans forgiven or $20,000 of Pell Grants. You can determine the type of loan you have by logging into your account with studentaid.gov. One thing to note is the debt relief is also not a lump sum. As a result, if your loan is less than the maximum forgiveness amount, you won’t be able to pocket the cash, but your loan will be paid off.

As mentioned, there is a qualifying income gap you would need to meet in order to be eligible for loan forgiveness. An individual borrower must have an income below $125,000 in either 2020 or 2021. For married couples filing joint taxes or as head of household, the annual income must not exceed $250,000. Eligibility is based on the adjusted gross income from either 2020 or 2021. Unfortunately, income from 2022 cannot be used. Current dependent college students can receive loan forgiveness, but they would have to use their parental income from 2020 or 2021, and the loans cannot have been issued after June 30, 2022.

Which loans qualify?

Another great question about the new student loan relief program is which loans are eligible for debt forgiveness? Any Federal Direct Loan will be eligible, including direct subsidized and unsubsidized loans, direct Grad PLUS loans, direct Parent Plus loans, and direct consolidation loans. Additionally, Federal Family Education Loans (FFEL) are eligible with a few caveats. The Federal Family Education Loan program was discontinued in 2010, and allowed private lenders to work with borrowers to provide education loans guaranteed by the government. FFEL loan holders are eligible as long as the debt is held by a federal loan servicer.

However, commercially held FFEL loans are not automatically eligible for student loan forgiveness. You can find out who holds your student loan by once again visiting student aid.gov. If your loan is commercially held, you’re not out of luck yet! The current workaround for borrowers is to move their FFEL loan to a federal direct consolidation loan, making it eligible for loan forgiveness. Listen to this episode for more information on the new student loan forgiveness program and how you could be eligible to eliminate some or all of your student debt!

Resources Mentioned