Everything you need to know about student debt forgiveness
On Wednesday, Aug. 24, President Joe Biden announced a plan to help relieve the pressure of student debt for millions of Americans. Part of that plan includes up to $20,000 in loan forgiveness for those who received Pell Grants and a maximum of $10,000 in relief for others who may qualify.
So, who qualifies? What is the process for getting loan cancellation? Does the plan affect future students? Bruce Blackmon, UNC Charlotte’s director of financial aid, answers questions about what you need to know now about the plan and shares advice for students on managing their debt while in college.
Who qualifies for loan cancellation under the Biden-Harris Administration’s Student Debt Relief Plan?
There are two things that determine eligibility.
The first is your income.
Individuals with an annual adjusted gross income of $125,000 or less and married couples with a combined income of $250,000 or less are eligible.
The second is the type of loan you received.
Federal Direct Student Loans and Federal PLUS Loans held by the federal government are eligible for the cancellation program for up to $10,000. Privately held loans are not eligible for cancellation under this program.
Additionally, Pell Grant recipients who meet the income threshold qualify for up to an additional $10,000 in loan cancellation – for a total of up to $20,000.
Do you have to complete your degree to be eligible for the cancellation program?
No, degree completion is not a requirement for loan cancellation – either for current or former students.
Does everyone receive the maximum amount of debt cancellation?
No. Debt cancellation only covers the remaining balance of outstanding loans. If you are eligible for the maximum amount of forgiveness but owe less than that amount, the balance of your loan will be paid in full.
What is the process for getting debt cancellation?
There is still much we don’t know about the process. Students shouldn’t expect to see $10,000 immediately wiped away from their loans. This process will take a few months, but indications are that an application will be available relatively soon. Right now, the best next step you can take is to sign up for updates on the Department of Education subscription page. Check the first box labeled “Federal Student Loan Borrower Updates.”
What if my spouse and I file our taxes together, but both have student loans?
If you and your spouse file your taxes jointly and earn less than $250,000 per year, you are both eligible for federal student loan cancellation.
Where can I apply for loan forgiveness?
The application is not yet open. You can be notified when the application is open by registering with the Department of Education. Once the application opens, borrowers can access the form via the federal student aid portal at studentaid.gov.
I qualified for a Pell grant several years ago and think I might qualify for the $20,000 in debt cancellation. How will the government know that I received it?
The Department of Education has Pell records going back to the 1990’s. If your grant was awarded after that, you should not need to submit any additional paperwork. If you received a grant prior to the 1990’s, you may have to submit information, but that is not clear just yet.
What can I do to be sure my cancellation goes through?
It will take time for the Department of Education to work through loan forgiveness for 8 million borrowers. You should check with your loan servicer on the status of your loan. Your loan servicer is who you make payments to every month for your loan. If you are a current student and not yet making payments on your loan, you can log-in to your dashboard at studentaid.gov to locate your loan servicer.
Will my monthly payments decrease or stay the same?
If you have left school and are already making payments, your monthly payments going forward will be determined by which repayment option you have chosen and the remaining balance of your student loans after the forgiveness has been applied.
If you are still in school, you are not yet required to make payments on your loans. Your payment will be calculated based on the repayment plan you choose and your loan balance when you graduate.
Contact your loan servicer directly with questions about your specific situation.
Does the debt cancellation plan cover loans for this semester?
Current and new students qualify if their loans were certified before July 1, 2022. Generally, UNC Charlotte certifies loans in June for students who have submitted a FASFA on time and completed all requirements to be awarded financial aid. Students who filed the FAFSA after July 1 for the 2022-23 school year or who did not complete all the necessary material to qualify for aid won’t have this semester’s loans forgiven.
What are other ways students can manage their debt while attending college?
Student loans exist to help students pay for educational expenses, but be mindful about the debt you take on:
Borrow only what you need to pay for necessary expenses. For example, don’t choose the most expensive residence hall or the most expensive apartment just because you have easy access to loans to pay for.
Excessive loan debt can hamper you later in life when you want to buy a house or a car.
Student loans are the only loans that cannot be discharged in bankruptcy, so it will be your responsibility to pay back your loans no matter what.
How is UNC Charlotte helping students lower the cost of education?
UNC Charlotte is always looking for ways to ease the loan debt burden. The average undergraduate student will leave with about $22,000 in federal student aid debt. While we would prefer for students not to graduate with any debt, our numbers are far below the national average of $35,000. The University has frozen tuition at the same amount for the past five years. Keeping costs as low as possible is an important step in helping students manage debt.
Where can I get additional information about the student debt relief program?
Visit studentaid.gov for more information.