The loan forgiveness application will be available in October to borrowers, but anyone who recently completed a FAFSA or is already enrolled in Income-Driven (also known as Income-Based) Repayment program (IDR/IBR) will get the forgiveness automatically (although they still recommend completing the application to be sure). If neither the FAFSA or IDR/IBR situation applies to a borrower, and they want to go to the head of the line to getting the $10K, they should contact their loan servicer now/very soon and enroll in an IDR/IBR plan now. Don't worry, signing up for IDR/IBR doesn't require them make any payments until January at earliest. Assuming their 2020 or 2021 income was below $125K (single) /$250K (couple), they will be among the first borrowers to get the relief and won’t/shouldn't have to fill out the application when it's available. And as you may have heard, the studentaid.gov website crashed repeatedly last week and whenever they get the applications out there, the website might well crash again, and you'll have a better chance of winning the lottery than getting through to your servicer on a phone line (there are two other big programs with October deadlines as well).
FYI, for students who are still in school, they will automatically get the relief as well if they/their parents completed a FAFSA for last year or this coming year; for dependent students, the income limits apply to the parents, not the student.
• Loans must be disbursed prior to 7/1/22 to be eligible, but for borrowers who are consolidating into FDLP, it is the disbursement date of the underlying loans, not the consolidation loan, that counts
• The reference to 8 million borrowers for which FSA already has data references 6 million FAFSA filers and 2 million borrowers enrolled in IDR/IBR
• The $125K/$250K income caps can be based on 2020 or 2021 income data; it sounded to me like a borrower gets the forgiveness if either year qualified, but that didn’t seem to be the highest priority for clarification in the Q&A
• Initially, the application will only be available in English, but a Spanish version is coming; the website information should be available in Spanish soon. There will also be a paper application in addition to the online version
• The current definition of which loans are eligible for forgiveness is “loans eligible for the payment pause” which would include all FDLP loans (Stafford and all PLUS), federally held and defaulted FFELP loans and federally held Perkins loans. The inclusion of non-defaulted, commercially held FFELP loans is “under discussion” (so I did not press my question about FFELP borrower benefits from my earlier email)
• Any federal education loans not currently eligible for forgiveness may become eligible by being consolidated into FDLP. My impression is that HEAL loans and college-held Perkins loans could become eligible that way, and sent a follow-up email seeking clarification.
• They expect the $10K-$20K to post 4-6 weeks after the application is complete (no guidance provided on when automatic forgiveness will occur for the 8 million borrowers referenced above). Given this 4-6 week timeline, they encourage borrowers to apply no later than November 15 to ensure their forgiveness posts prior to the 12/31/22 end of the payment pause, but they will continue to process applications received after that date.
• They acknowledge that there are significant operational challenges ahead for this program (thus my advice above to sign up for IDR now to get towards the front of the line!) and that the web portal crashing last week got their attention
• For borrowers with more than $10/20K in loans, they plan to use a “payment waterfall” approach (if you’ve issued bonds or read their disclosures, you’ll recognize the term ‘waterfall’). The forgiveness will be applied first to defaulted loans, then the loans with the highest interest rates and then unsub loans prior to subsidized loans. I emailed some follow-up questions around this issue that were too wonky for the call, but you’ve seen them in my earlier email.
• Borrowers don’t need to document whether they received Pell; the process will be automated as long as there was any Pell award since 1994. Even one semester of Pell qualifies a borrower for the $20K forgiveness benefit.
• While the forgiveness application will not require a DRT process – the borrower will self-certify their income - some borrowers will be selected for verification.
Original source can be found here.
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