What to Know About Student Loan Forgiveness

Since August 2022, it seems like everyone has been talking about the Federal Government’s Student Loan Forgiveness. But what exactly is in this plan and who will it affect?

As it turns out, more than 800,000 Massachusetts borrowers with federal student loan debt are eligible for student loan forgiveness and even more may be aided by the less talked about aspects of the plan. The entire plan includes targeted debt relief, changes to income-driven repayment plans, changes to the Public Service Loan Forgiveness (PSLF) program and more.

What is the federal student debt relief plan?

While the details are nuanced, there are essentially three parts to the plan:

• • Borrowers must have an individual annual income of less than $125,000, or a household income of less than $250,000 if you file taxes jointly. If you meet this criteria, you are eligible for up to $10,000 in student loan debt cancellation.
  • If you received a Pell Grant in college and meet the income requirements, you are eligible for up to $20,000 in debt relief. Pell Grants are awarded to undergraduate students who demonstrate exceptional financial need (per their FAFSA application).

Rockland Trust Article You May Be Interested In: Should My Family File the FAFSA?

I’m eligible! Now what?                                                   

If you think you (or your child) is eligible, it is best to sign into your Federal Student Aid account to sign up for text alerts and ensure all of your contact information is up to date. You should do the same for your student loan servicer – this information can be found in your Federal Student Aid account if you are unsure who services your federal loans.

While it is possible that some debt relief will happen automatically, be sure to check in with your loan servicer and apply through the Department of Education application if you are unsure.

An online application is slated to open in October 2022. The Department of Education has a subscription page to get an alert when the application is open. Applications for the program will be accepted until December 31, 2023.

It’s important to note that, where there is access to money, there are scammers. A list of dos and don’ts is listed here, but in general, the precautions you would take to keep your bank account information and passwords safe apply to your FAFSA ID and password. Be wary of unsolicited calls asking you about your student loans and report any scam attempts to the FTC.

If you have questions, the Federal Student Aid page has an FAQ that may help.

It’s also important to keep in mind that federal student loan repayment is scheduled to resume in January 2023. Because of application processing time, it may benefit you to apply before mid-November if possible. If you still carry a loan balance after debt relief, your monthly payments may change as it will be recalculated.

Any kind of loan or debt can impact your long-term financial plans. If you are relieved of some student loan debt and need guidance on how to set new financial goals, we’re here to help. Our Learning Center offers helpful advice for budgeting, reaching financial milestones like homeownership or retirement and our bankers serve as trusted advisors as you navigate the many changes in your financial life.

Apply for Student Loan Forgiveness Here