Q&A: Debt Relief & the Loan Pause
Recent decisions on student debt relief – including pausing loan repayments until the end of the year – mean borrowers with federal loans owned by the U.S. Department of Education are eligible for relief.
We explain some of the ways the announcements affect borrowers and the financial aid community. Global will provide additional information as more details from the Department of Education become available.
Q. Who is eligible for student loan relief and forgiveness?
A. Targeted debt relief is designed to ease economic burdens from the COVID-19 pandemic and other sources. Borrowers with an annual income during the pandemic of less than $125,000, or $250,000 for married couples, are eligible.
· Borrowers who received a Pell Grant are eligible for up to $20,000 in debt cancellation.
· Borrowers who didn’t receive a Pell Grant are eligible for up to $10,000 in debt cancellation. The amount of relief is capped at the amount of the loan’s outstanding balance. For example, if a borrower qualifies for $10,000 in relief and has a total balance of $8,000 owed on student loans, loan forgiveness would be $8,000.
· Borrowers employed in public service may be eligible to have their student loans forgiven through the Public Service Loan Forgiveness program. A new, limited-time waiver and temporary changes make it easier to receive loan forgiveness through PSLF, but borrowers must apply before October 31, 2022, when the temporary changes expire. You may be eligible under the waiver for credit payments that previously didn’t qualify. For information on eligibility and the steps to take to apply, please visit www.pslf.gov or www.studentaid.gov.
For resources on PSLF qualifying:
· Click here to read about changes to PSLF, a help tool and how to apply.
· Read about qualifying for the limited-time waiver here.
Q. Will students need to apply for loan forgiveness?
A. Most borrowers will need to apply, and for others loan forgiveness will happen automatically.
· About 8 million borrowers automatically receive debt relief because their income information is already available to the Department of Education.
· If the department doesn’t have income data, borrowers will need to apply. The department will make a simple application available in early October. To receive notifications about the application, you can sign up at the department’s subscription page.
Q. When can a borrower expect debt relief?
A. Within 4 to 6 weeks after an application is completed.
Q. Are both PLUS loans included in debt relief?
A. Yes. Our understanding is that debt relief includes Direct PLUS loans for graduate students and Parent PLUS for parents of dependent undergraduate students.
Q. What deadlines do we know of so far that affect debt relief and applications?
A. These are timelines to look for in the coming months:
Early October – The application to apply for debt relief becomes available. Sign up at the Department of Education's subscription page for notifications.
Before Oct. 31 – Applicants who may qualify for PSLF relief under the new waiver should file before the waiver expires on Oct. 31, 2022.
Oct. 31 – Temporary waiver for PSLF expires.
Nov. 15 – FSA recommends borrowers apply by Nov. 15, 2022, so they can receive debt relief before the payment pause expires, but borrowers have until Dec. 31, 2023, to apply.
Dec. 31 – The loan payment pause expires. This is the final time loan repayments will be paused.
January 2023 – Loan payments resume.
Jan. 1 – The department will continue to process applications for relief after January 1, 2023.
For details, you can read the Department of Education’s announcement here.
You can access answers to Frequently Asked Questions from Federal Student Aid here.
For information on Public Service Loan Forgiveness waivers, visit here.