By Aman Jain. Originally published at ValueWalk.
With states continuing to send targeted payments to low-income households, one group may have felt neglected, and that is students. The Biden administration, however, recently announced a new initiative that would serve as students stimulus checks to offer much needed relief to student loan borrowers. This initiative would significantly expand the number of borrowers eligible for student loan forgiveness.
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Students Stimulus Checks: Who Will Get Them?
A recent initiative from the Biden administration expands the income based repayment programs. As per the Education Department, a minimum of 40,000 student loan borrowers will get immediate, automatic student loan forgiveness, while another 3.6 million borrowers will move toward getting their student loan debt completely wiped out.
“Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan,” the Education Department said in its guidance.
Moreover, because of the latest change, the borrowers who aren’t eligible for immediate, automatic student loan forgiveness through the IDR changes would automatically progress toward getting their student loans wiped out.
The IDR here means Income-driven repayment, and recent IDR changes by the Biden administration drastically expand student loan forgiveness eligibility under IDR. According to the Education Department, it would start giving information on the payment counts and IDR progress reports for borrowers from next year.
Student Loan Forgiveness Initiative: All You Need To Know
Under the new IDR changes, thousands of borrowers would also be eligible for immediate student loan forgiveness through PSLF (Public Service Loan Forgiveness).
“If you have 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance, you will receive PSLF credit for those periods of time if you certify qualifying employment,” the Education Department said in its guidance.
These students stimulus checks would be available automatically, but borrowers who don’t have certified employment for the said period would have to apply for the relief through the Department of Education’s online PSLF Help Tool.
Although the Education Department will be automatically counting past periods of forbearance of 12 consecutive months or more and 36 cumulative months, borrowers who want shorter forbearance periods will have to do some work.
According to the Education Department, such borrowers would have to file a formal dispute to the Department’s FSA Ombudsman. They also need to prove that they were inappropriately pushed into forbearance during that period. The authorities would decide on such borrowers on a case by case basis.
Separately, borrowers with FFEL-program loans can also benefit from the IDR reforms. These borrowers, however, will have to consolidate their loans through the federal Direct consolidation loan program, the Education Department said.
Such borrowers will have to consolidate before the department completes the implementation of these changes. The education department estimates completing the implementation no sooner than Jan. 1, 2023.
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