The Biden administration is in various stages of implementing multiple student loan forgiveness initiatives. However, depending on which program the borrower applies for and when they submit their loan forgiveness application, the timeline for receiving relief can vary greatly.
Here’s what borrowers can expect:
If Borrowers Can Expect Relief Under Biden’s One-Time Student Loan Forgiveness Plan
Government-held federal student loan borrowers could receive under Biden’s one-time student loan cancellation initiative announced in August Up to $20,000 in student loan forgivenessTo qualify, single and married individual filing borrowers must earn less than $125,000 in 2020 or 2021, and married joint filing borrowers must earn less than $250,000. is.
Department of Education Launched online application More than 20 million borrowers have already applied last month. A senior government official said the application will be processed on a rolling basis until 2023, and expects it will take him four to six weeks from the time the borrower submits the application to receive the student loan forgiveness. . Borrowers were required to apply by November 15 to receive loan forgiveness before the nationwide student loan suspension ends at the end of the year.
However, legal challenges could disrupt this timeline.Federal Court of Appeal temporarily blocked the initiative Pending consideration of legal arguments filed by the Republican-led coalition of states seeking to block the Biden administration and plans. During temporary stays, the Department of Education will accept, but not process, student loan forgiveness applications. If the suspension is lifted, officials have said they intend to move forward “full speed ahead” to implement the program. However, the timeline for this initiative is unknown until the court issues its next ruling.
Student Loan Forgiveness Under Limited PSLF Waiver
Created by the Biden Administration Restricted PSLF Waiver This is a federal student loan forgiveness program for borrowers who commit to work for a nonprofit or government agency. Under the waiver, the Department of Education can retroactively count past loan terms as “eligible payments” for loan forgiveness under the PSLF that would have previously been denied. This includes not only past repayment periods, but also past deferrals and grace periods.
The Limited PSLF Forgiveness will move many borrowers towards a final loan forgiveness. As a result of the waiver, a person who exceeds the 120 threshold of eligible her PSLF payments will be forgiven of eligible federal student loans.
The restricted PSLF exemption officially ended on October 31st. However, the Ministry of Education is still processing applications. In terms of timing, I would expect the following:
- Some borrowers had to consolidate their loans through the Federal Direct Consolidation Program in order to qualify for student loan forgiveness under the restricted PSLF forgiveness. The consolidation process can take 30 to 60 days, but consolidation applications are considered timely if submitted online at StudentAid.gov by October 31, according to the Department of Education.
- MOHELA, the Department of Education’s contracted PSLF loan servicer, conducts an initial review of the PSLF Employment Certificate submitted by the borrower. This process may take at least 90 days, but may take longer. And that first review may only determine whether an employer is eligible. MOHELA may not initially count all her PSLF payments as “eligible”. This is normal behavior (although certainly frustrating for many borrowers).
- After MOHELA conducts an initial review, the Education Department reviews the borrower’s account and directs MOHELA to update the borrower’s PSLF payment frequency in accordance with the Limited PSLF Waiver Rules. This part of the process can take weeks or even months. The Department of Education has just started adjusting her PSLF payout times to include eligible grace periods.
Therefore, it can take months for some borrowers to obtain relief through the Limited PSLF Waiver Program, and borrowers should be prepared for a lengthy process.
If the borrower gets student loan forgiveness under IDR account reconciliation
The Biden administration is in the early stages of rolling out yet another loan forgiveness program called the Loan Forgiveness Program. IDR account reconciliationSimilar to the limited PSLF waiver, this initiative will allow the education sector to retroactively extend past loan terms (including past repayment periods and many deferrals and grace periods) to 20 or 25 years of income-driven borrowers. can count towards the type loan forgiveness period. Repayment (IDR) plans, even if they are not currently included in such plans.
The initiative will automatically roll out to borrowers with federal student loans held by the government, with a target date of July 1, 2023. Borrowers who have accumulated enough historical credits under this initiative to reach a 20- or 25-year IDR will be eligible for automatic loan forgiveness. The IDR account reconciliation also benefits PSLF borrowers, effectively providing a second shot of peace of mind to many such borrowers should they miss the deadline for her limited PSLF exemption.
Some borrowers are required to consolidate their loans through a direct consolidation program in order to qualify to maximize their benefits. According to the Department of Education face sheet, “To receive this credit against the IDR, the borrower must have a direct or FFEL loan administered by the Department.” “Borrowers with other types of federal loans must be integrated into the Direct Loan Program in order to receive credit…. All borrowers have until May 1, 2023 to take full advantage of the one-time account adjustment benefits. We need to apply for integration.”