What to know if you’ve applied for student loan forgiveness

Date:

NEW YORK (AP) — President Joe Biden’s plan to provide up to $20,000 in federal student loan forgiveness has been blocked by two federal courts, leaving millions of borrowers wondering what happens next. The board plans to appeal. This is what you need to know if you have applied for an exemption:

WHAT HAPPENS NOW?

While the request for exemption has been removed from the Federal Student Aid website, applications that have already been submitted are put on hold while the appeal works its way through the courts.

“Courts have issued orders blocking our student debt relief program,” the Department of Education said on its site. “As a result, we are not accepting applications at this time. We are trying to reverse those orders.”

A federal judge in Texas ruled that the plan exceeded White House authority. Before that, a federal appeals court in St. Louis temporarily put the plan on hold while it considered a challenge from six Republican-led states.

Still, lawyers believe the administration will succeed in court.

“We are confident that they will find a way to cancel people’s debts,” says Katherine Welbeck of the Student Borrower Protection Center.

Experts say student loan forgiveness has the potential to end up in the Supreme Court, meaning it could be a lengthy process.

WHEN WILL PAYMENTS RESUME?

Most people with student debt won’t have to pay during the coronavirus pandemic, but payments will resume in January along with interest accrual.

Biden previously said the payment pause will not be extended again, but that was before the court halted his plan. He is now under increasing pressure to continue the break while the legal challenges play out for the program.

WHAT IF I HAVE ALREADY APPLIED FOR HOUSEKEEPING?

More than 26 million people have applied for cancellation in less than a month, according to the Ministry of Education. If you are one of them, you don’t have to do anything now.

According to the Biden administration, about 16 million people had already approved their applications. But due to legal action, none of the aid was actually provided.

The Department of Education will “quickly process their relief once we prevail in court,” White House press secretary Karine Jean-Pierre said.

WHAT IF I HAVE NOT APPLIED FOR HOUSEKEEPING YET?

For those who have not yet registered, the application for remission is no longer online. But there are still steps people can take to get their debt forgivenshould the appeal succeed, Welbeck said.

“People still have to check their eligibility,” she said. “As the news changes, people should be on the lookout for updates from the Department of Education.”

You can sign up here to receive the latest news from the Federal Student Aid website.

WHO IS ELIGIBLE, SHOULD THE APPEAL PASS?

The forgiveness plan announced in August would forgive $10,000 in student loans for those earning less than $125,000 or households with incomes less than $250,000. Pell Grant Recipientsthose typically demonstrating greater financial need would receive an additional $10,000 in debt forgiven, for a total of $20,000.

Borrowers are eligible if their loans are disbursed before July 1.

According to the administration, about 43 million student loan borrowers are eligible for some debt forgiveness, of which 20 million could have their debt forgiven entirely.

ARE THERE OTHER WAYS OF CANCELLATION?

For those who have worked for a government agency or a non-profit organization, the government loan forgiveness program offers cancellation after 10 years of regular paymentsand under some income-driven repayment plans, the rest of a borrower’s debt is forgiven after 20 to 25 years, Welbeck said.

“Borrowers should make sure they’re signed up for the best income-related repayment plan possible,” Welbeck said. In July, the administration will review and adjust some of the accounts enrolled in these plans. You can find out more about those plans here.

Borrowers who have been defrauded by for-profit schools can also file for borrower defense and get relief, Welbeck said.

SHOULD I RESUME PAYMENTS WHEN THE PAYMENT HAZARD HAS BEEN ENDED?

Proponents, including the Student Borrower Protection Center, are still urging the president to extend the pandemic-era payment freeze, arguing that students are entitled to the promised cancellation before the January refund date arrives.

That said, Welbeck recommends logging into your account, making sure you know who your administrator is, your due date, and whether you’re enrolled in the best income-driven repayment plan as you continue to pay.

The Center for the Protection of Student Borrowers will hold regular webinars in the coming months on how to follow the changing policy. You can register here.

If your budget doesn’t allow you to resume payments, it’s important to know how to navigate the possibility of student loan default and delinquency. You can read more about this here. Both can damage your credit, making you ineligible for additional support.

If you are in financial difficulties in the short term, you may qualify for a deferment or postponement. Each of these options allows you to talk to your administrator about ways to temporarily suspend your payments. More information about these options can be found here.

WHAT ELSE SHOULD I KNOW?

Watch out for scams and only get information from trusted sources, such as the Department of Education’s Federal Student Aid site.

IS IT POSSIBLE THAT THE DEBT WILL NOT BE PASSED?

Yes. The issue of debt cancellation is now before the court.

The government is not saying whether it will explore other debt cancellation options if it loses its appeal. But proponents point to other ways the debt could be forgiven, including through the Higher Education Act.

HOW DO I PREPARE FOR STUDENT LOAN PAYMENTS TO RESTART?

Betsy Mayotte, president of the Institute of Student Loan Advisors, is encouraging people not to make payments until the break is over.

“I’ve told people to pretend they’re paying off their college debt, but put it in an interest-bearing account for now, if you can,” she said. “Then you have maintained the habit of making the payment, but also earning a little bit of interest. There’s no reason to send that money to the student loans until the last minute of zero percent interest.

Mayotte recommends that borrowers use the loan simulator tool on StudentAid.gov or those on TISLA’s website to find the repayment course that best suits their needs. Once you enter your information, it tells you what your monthly payment would be under each available plan, as well as what the long-term costs are.

“I really want to focus on the long term,” Mayotte said. “Often I see people who may be struggling financially. They will find a lower monthly repayment option and then: ‘Set and forget.’”

Mayotte encourages people to switch to higher payments when their financial situation stabilizes so that the loan does not end up being more expensive in the long run.

Other useful tips that can save costs for borrowers:

— If you sign up for automatic payments, the administrator takes a quarter of a percent off your interest rate, according to Mayotte.

— Means-tested installment plans are not suitable for everyone. That said, if you know that you will eventually qualify for forgiveness under the Public Service Loan Forgiveness Program, it makes sense to make the lowest possible monthly payments since the rest of your debt will be forgiven once that decade of payments is completed.

– Re-evaluate your monthly student loan payments at tax time, when you have all your financial information in front of you. “Can you afford to raise it? Or should you lower it?” Mayotte said. “Always look at your long-term student loan management strategy.”

— Divide payments in whatever way works best for you, whether that’s two installments per month so it’s not a big lump sum at the end or beginning, or putting cash aside in envelopes for specific purposes.

“Even if it’s an extra $5 or $20 a month, that’s a good strategy,” Mayotte said. “If they can afford to pay a little more per month — the more you pay and the faster you pay, the less you pay in the long run.”

Mayotte gave an example of a borrower with higher education debt in the six figures. She had recently gotten married and she and her husband and children decided to save every five dollar bill in a cookie jar to go towards the loans.

“That amounted to a few hundred dollars a quarter,” Mayotte said. “Everyone has a different financial personality. There are people who are very good at budgets. There are people who need to play games and fool themselves. And people shouldn’t judge each other’s financial personalities.”

—-

The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Popular

More like this
Related