MIT’s Student Financial Services (SFS) put together the following information about President Biden’s student loan forgiveness program.
Quick facts about Biden’s loan debt relief
- Eligible loans include Direct Loans (subsidized & unsubsidized), Parent PLUS loans, Grad PLUS loans, and consolidated loans. Other loans included in the relief plan are Federal Family Education Loans (FFEL) held by ED or in default at a guaranty agency, and federal Perkins loans held by ED.
- Consolidated loans are eligible as long as all of the underlying loans that were consolidated were first disbursed on or before June 30, 2022. If a borrower consolidated federal loans into a private non-federal loan, the consolidated private loan is not eligible for debt relief, according to ED.
- Defaulted loans — including federally-held or commercially serviced subsidized Stafford, unsubsidized Stafford, Parent PLUS, and Grad PLUS, along with Perkins loans held by ED — are also eligible for relief. Defaulted borrowers with a remaining balance after the relief are recommended to get out of default through ED’s new “Fresh Start” initiative.
- The application to receive relief will be available online by early October 2022 and a paper version of the form will be made available at a future date. Borrowers will have until Dec. 31, 2023, to submit their application.
- Relief may be granted without needing to complete an application if the students income data is already available to ED. I would strongly advise against assuming this is you. If you are eligible for this program and are interested in pursuing the $10,000 forgiveness, completing the application is recommended.
- Once approved, borrowers with remaining balances will have their monthly payments recalculated based on the new balance.
For borrowers with multiple loans, such as multiple Direct Loans, ED will apply the relief in the following order:
- Apply relief to loans with the highest statutory interest rate.
- If interest rates are the same, apply to unsubsidized loans prior to subsidized loans.
- If interest rate and subsidy status are the same, apply to the most recent loan.
- If interest rate, subsidy status, and disbursement date are the same, apply to the loan with the lowest combined principal and interest balance.
ED will identify borrowers who applied for Public Service Loan Forgiveness (PSLF). If borrowers receive the one-time cancellation and are later found to have been eligible for PSLF forgiveness, ED will adjust borrowers’ loan and apply the PSLF discharge, which may provide a refund on certain eligible payments made after the borrower has already made 120 payments.
Though the loan debt relief won’t be subject to federal income taxes, state and local tax implications will vary. ED states borrowers are eligible for debt relief regardless of whether they’re in repayment, in school, or in grace, as long as they meet the income requirements and have eligible loans.
MIT students/parents/faculty/staff may be eligible for $10,000 ($20,000 if Pell) in federal student loan forgiveness based on their financial situations. Single borrowers making less than $125,000, or households earning less than $250,000 are eligible for this opportunity. Interested parties should sign up here, ED subscription page, to be notified when the application is open. An application for loan forgiveness will be made available in “early October”.
While some individuals may be eligible for automatic forgiveness, that seems like an unnecessary gamble to take given that this program has an expiration date of December 31, 2023. ED will continue to update this page, https://studentaid.gov/debt-relief-announcement/one-time-cancellation, as more information becomes available.
FTC Warns borrowers of scammers after Biden’s loan cancellation announcement
- Scammers are attempting to capitalize on Biden’s Loan Cancellation plan.
- Please note that the application for loan forgiveness is not yet available and will be made public in early October.
- Anyone who says they can guarantee eligibility, get you in early, or tries to charge you for this service is a scammer.
- Some red flags are messages that ask for an advance fee from borrowers in order to get loan forgiveness or claims that they’re calling on behalf of the federal government. Other times, scammers will try to convince borrowers they’ll be able to get them a better deal than the federal government, or press the borrower to sign up to a time-limited program to get forgiveness.
- If borrowers think that they have received a scam call, they can register for the National Do Not Call Registry. However, if messages persist, borrowers can report the calls to the FTC and give context about the messages they’re receiving.
What does this mean for MIT?: MIT students/their parents/faculty/staff should be vigilant not to fall for a scam regarding loan forgiveness. The application for loan forgiveness is not yet available and will only be made available in early October. Don’t fall for this! Avoid giving out personal information or agreeing to let callers sign into their student loan accounts.