Here’s Who Qualifies For Student Loan Forgiveness – Forbes Advisor
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The Biden administration has canceled $9.5 billion in federal student loans since taking office. But it’s not the widespread student loan forgiveness that many borrowers hoped to get.
Instead, disabled borrowers and those defrauded by now-closed schools have had their debt forgiven. Here’s what you need to know and what it could mean for widespread student debt cancellation in the future.
Who qualifies for Biden’s student loan forgiveness?
Instead of a generalized discount, the groups eligible for loan forgiveness are specific. It is important to note that they only apply to federal student loan borrowers. So, if you fall into one of the two categories and have private student loans, they are not eligible for the forgiveness.
Eligible groups include:
In August, the administration announced it would automatically forgive student loan debt for Americans who are “totally and permanently disabled” and therefore have limited income. More than 323,000 borrowers have received more than $5.8 billion in student loan release as a result of the action.
The automatic loan forgiveness for people with disabilities comes after advocates pointed out that the current rules are too onerous for borrowers. Borrowers with disabilities were already eligible for loan forgiveness, but the process required them to provide documentation of their disability. They had to prove that they had earned little or no income during a three-year follow-up period.
A press release from the Ministry of Education notes how flawed the system was with reference to a 2016 report by the Government Accountability Office. This report found that 98% of borrowers who applied for disability top-ups ended up having to continue repaying their loans because they failed to submit the proper documentation, not because they were making too much money. The new automatic debt forgiveness measure aims to make the process easier for people with disabilities. Disabled borrowers who are registered with the Social Security Administration (SSA) will begin to be matched for discharge beginning in September.
Borrowers with disabilities face significant barriers to obtaining stable-paying jobs and, as a result, find it disproportionately difficult to repay their loans. According to the regulations published by the Department of Education, 62% of loans held by borrowers with disabilities have defaulted at some point.
Victims of for-profit college fraud
The Biden administration also canceled $2.6 billion in student loan debt for borrowers defrauded by their college or university under the borrower’s defense against repayment rule. Under this rule, borrowers are protected from schools that violate laws or mislead their students.
For example, students who attended ITT Technical Institute (also known as ITT Tech) were significantly misled about the types of jobs they could get after graduation and how much money that they could win. Instead, most of the institution’s credentials were worthless and made it harder for students to find jobs.
The Department of Education investigation also found that transferring ITT Tech credits to other schools was generally not possible, which meant that former students were saddled with student loan debt that did not brought them closer to achieving their academic goals.
Former ITT Tech students who think they may be eligible for student loan discharge should learn more about the process on the Department of Education Federal Student Aid website here.
No, widespread student loan cancellation is not coming
Although the Biden administration has canceled billions in federal student loans, they represent only a fraction of the total $1.7 trillion in borrowed federal student loans.
And from now on, it would be unwise to bet on Biden giving a general forgiveness of student loans.
At the start of the Covid-19 pandemic, Biden publicly supported cancellation of $10,000 of student loan debt per borrower. Since then, he has done little to signal that he would ever be prepared to take such strong action – and he may not even have the authority to do so.
House Speaker Nancy Pelosi recently said that Biden lacks executive power to cancel student loans— taking such action should be an act of Congress. According to her, “the president can only postpone, delay, but not forgive”.
Instead, Biden extended the federal student loan forbearance period twice during the pandemic. The program, which began in March 2020, will now expire after January 31, 2022. During this period, most federal student loan repayments were suspended without interest.
A bipartisan bill to simplify the release of the student loan in the event of bankruptcy was introduced earlier this month but made no legislative progress.
For now, borrowers should continue to live with the reality that their student loans are a long-term commitment, with the understanding that they are unlikely to be forgiven anytime soon.
Borrowers worried about their student loan repayments should contact their managing agent directly to discuss affordable payment options before the current forbearance period ends at the end of January.
Editor’s Note: This post has been updated to include a new round of student loans for former ITT Tech students, now authorized for forgiveness by the Department of Education, announced 8/26/21 .
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