Understandably, we’ve been getting a lot of questions about the Government’s decision to forgive student loan debt. For those with student loan debt, a lot of questions remain – am I eligible? Do I have to do anything? What happens when repayment starts?
All great questions – and what we’ll cover in the article below. We’ll discuss the basics of the student loan forgiveness plan, what you need to do, and key dates you need to know.
What is the Student Loan Forgiveness Plan? Who is Eligible?
The forgiveness is up to $10,000 for Federal Student Loan Borrowers and up to $20,000 for Pell Grant recipients.
In order to be eligible, your annual income must be below $125,000 (for individuals) or $250,000 (for married couples or heads of households). That’s your current (this year) annual income – if you were above that threshold last year, you may still apply. And you have to have an outstanding student loan balance. That’s really all there is to it – but if you’re still not sure and are a Minnesota resident, please give us a call at 651-490-9790. We can talk through your specific situation to help inform you about your options and if this applies to your loans.
If I'm Ellible, What Do I Need to Do?
There are a few things you’ll want to do now:
- Verify your loans qualify (see requirements above). If you don’t have a Federal Loan or Pell Grant but instead have a Federal Family Education Loan, consolidate your loan into the Direct Loan Program.
- Gather your records. We still don’t know exactly what records you’ll need to apply for loan forgiveness, but most likely you’ll need a record of your loans, how much you’ve paid against them, and your current outstanding balance. I you’re looking for an easy place to consolidate that information, you should be able to access it via StudentAid.gov
- Sign up for updates. We strongly recommend signing up for federal student loan email updates at gov/subscriptions. That’s going to be the best way to get instant information about loan forgiveness.
If you are eligible for loan forgiveness, you will want to start the application process as soon as possible. This is extremely important, and there are key dates you need to pay attention to so you don’t miss anything.
Key Dates to Know
1. 10/15/22 – Application process goes live
The application process is now live - all you have to do is submit the form on the StudentAid.gov website.
2. 11/15/22 - Apply by this date for forgiveness
Eligible borrowers should aim to apply by 11/15 as they are estimating the time to process the loan forgiveness is roughly 6 weeks. The current pause that the government has put on student loan payments will be lifted 12/31/22, so if you are able to get your loans eliminated before that deadline, you may not have to make another payment on your loans or if you have more than the $10,000, you will at least have a lower overall payment.
3. 12/31/22 - Payment pause ends
Currently, student loan repayment is paused – but that’s coming to an end with this year. Repayments will resume on January 1, 2023. Make sure you have applied for forgiveness by then.
If you are estimated to have more student loans, even after the elimination of $10k or $20k, it’s important to come up with a repayment plan prior to the pause end. You can find repayment plans at both StudentAID.gov and FreeStudentLoanAdvice.org. Need help deciding between your options? We can also help with that.
4. 12/31/23 - Final date to apply for forgiveness
Once the application process begins, it won’t last forever. The information we have now tells us that 12/31/23 is going to the cutoff date to apply for forgiveness. We recommend applying as soon as possible.
We hope this article helped address some of your common questions about the new student loan forgiveness plan.
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Greater Midwest Financial Group is a financial advisor firm serving St. Paul, Minneapolis and the wider Twin Cities area. We specialize in wealth management, retirement planning, asset management and other personal finance needs.