The Department of Education has officially released the student loan debt relief application.
Not everyone has to apply to get student loan cancellation. Nearly 8 million federal borrowers will receive relief automatically because they are enrolled in an income-driven repayment plan; their income information is on file with the Department of Education.
All other eligible borrowers will need to submit an application to see their balances drop by as much as $20,000. During a three-day beta test starting Friday, Oct. 15, the White House says more than 8 million borrowers submitted information.
To apply, you don’t need to upload documents to prove your income, but you eventually will need to do so.
When does the student loan cancellation application open?
Now that the application is available, here are some other dates to keep in mind:
- Oct. 23: The Biden administration says not to expect relief before this date.
- Mid-November: Date you must submit an application if you want to ensure you receive relief before payments restart in January.
- Jan. 1. 2023: Payments resume on federal student loans.
- Dec. 31, 2023: The student loan debt relief application deadline.
- March 31, 2024: Proof-of-income submission deadline.
What will I need to apply for student loan cancellation?
A preview of the student debt relief application provided by the education department shows borrowers will need to provide their:
• Social Security Number.
• Date of Birth.
• Phone number.
You must also verify that you will provide proof of income to the education department by March 31, 2024. And you must agree that you certify all of the information you submit is true under penalty of perjury.
When you do submit proof of income, you must include one of the following:
• IRS Form 1040 (tax return) from 2020 or 2021.
• IRS Tax Return Transcript from 2020 or 2021.
• If you didn’t file taxes: IRS Verification of Non-filing letter from 2020 or 2021.
Who qualifies for student loan cancellation?
There has been confusion about who is and isn’t eligible for relief. Here’s a refresher:
Those eligible for up to $10,000 in relief:
- For 2020 or 2021, your income must be below $125,000 if filing individually or $250,000 if filing jointly.
- Did not receive a Pell Grant during college.
- Have undergraduate direct loans; graduate direct loans; parent PLUS loans; PLUS graduate loans; government-owned Perkins loans or government-owned loans under the Federal Family Education Loan Program, or FFELP.
- Your loans must have been disbursed by June 30, 2022.
Those eligible for up to $20,000 in relief:
- The requirements above except for not receiving a Pell Grant.
- Received a Pell Grant during college. You can find out if you received a Pell Grant by logging on to the National Student Loan Data System website or Federal Student Aid website using your FSA ID. Your previous aid information should be on the Financial Aid Review page.
- Only undergraduate debt is eligible for the additional $10,000 in cancellation.
Those ineligible for relief:
- Have private student loans.
- Have commercially held FFELP loans. However, those who applied to consolidate their debt before Sept. 29, 2022, would qualify.
Who gets automatic student debt relief?
Only borrowers already enrolled in income-driven repayment plans are eligible for automatic relief. These borrowers will receive notification of their eligibility by the education department. Those who would like to see their relief processed sooner can apply now.
How to opt out of student debt relief
Those who are eligible to receive the relief automatically can choose to opt out. If you want to opt out, you should reach out to your servicer directly to let them know you don’t want to receive relief, according to the education department. Borrowers who are eligible for relief automatically must opt out by Nov. 14, 2022, according to the Washington Post. If you choose to opt out now, you can still apply for relief later as long as you do so before Dec. 31, 2023.
Why would anyone opt out of relief? Well, some borrowers object to the move to cancel debt. Others may be concerned about their personal tax implications. While there is no federal tax on the relief, the canceled amount may be taxed as income by some states, including Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin.
How will I know when cancellation has occurred?
Expect to receive relief within six weeks, according to the Education Department. You’ll be notified through your servicer. Watch your loan account through your servicer or at studentaid.gov.
Why can’t I get in touch with my servicer?
The Education Department is handling and processing the cancellation applications, not the company that manages your loans.
You may have questions about the status of your cancelled debt. If you call your servicer, you’ll be in a long line: Millions of borrowers have switched servicers, are planning upcoming return of payments, or are straightening out qualifying payments for Public Service Loan Forgiveness. Your only option? Wait on hold, or wait for them to notify you.
What if I get a call about student debt relief?
Any unsolicited call you receive about cancellation is probably a scam. Scams have been running rampant since President Joe Biden’s announcement of loan cancellation, according to the Federal Trade Commission. The Education Department or your servicer will not call you about applying for debt relief. If you have a doubt about a call you receive, hang up and contact your servicer. If you have concerns about an unsolicited text message regarding student loan cancellation, do not respond. And never give out your financial student aid identification, account number or password to anyone.
What about all those lawsuits?
Multiple challenges to Biden’s executive order to cancel student debt have come out in recent weeks. Those targeting the cancellation effort include state attorneys general as well as individuals and local associations backed by law firms. If any of the challenges are deemed viable, cancellation could be delayed or halted.
While lawsuits are pending, the Biden administration says it won’t deliver any cancellation until after Oct. 23.