Tens of thousands of federal student loan borrowers are probably wondering: Is my debt load about to get a little lighter?
The Biden administration announced Friday that the remaining loan balances of more than 800,000 borrowers will be erased as part of a program to address past mistakes made by loan servicers who failed to extend payment credit where it was due, or who may have given bad advice when borrowers asked for help.
In the coming days and months, thousands of borrowers will find out if they received an account adjustment that resulted in enough qualifying payments to eliminate their loans, a process that will continue through the end of the year. After that, borrowers who still don’t have enough qualifying payments to pay off will receive their updated payment accounts.
Here’s what we know about who’s eligible:
Who qualifies?
Borrowers with direct loans or those made through the Federal Family Education Loan, or FFEL, program and held by the Department of Education may qualify, including Parent PLUS loan borrowers.
But borrowers are eligible for debt cancellation only if they have reached the qualifying amount of payments, which is the equivalent of 20 or 25 years of qualifying monthly payments, or 240 or 300 payments on an income-driven repayment plan ( where payments vary based on borrower’s income and family size) or a standard payment plan.
The precise amount of qualifying payments will vary depending on the borrower’s loan type and the payment plan in which the individual is enrolled.
How do I know if I received extra credit for payments?
Borrowers’ updated payment count will include any month in which they have paid, regardless of the type of loan, the payment plan used, or whether payments were partial or late.
But they will also receive credit for any period spent 12 or more consecutive months in forbearance, as well as any month in forbearance for those who spent 36 or more cumulative months in forbearance.
Any month spent in deferral, except the in-school deferral, before 2013 will also count. The same is true for any month spent in economic hardship or military deferment on or after January 1, 2013.
The situations described will also count if they occurred before you consolidated your loans.
When will debt cancellation begin?
Immediately.
The Education Department said it would inform borrowers if they had enough payments to pay off without any further action on their part, and would continue to notify borrowers who have reached the debt elimination threshold every two months until next year.
Debt discharges will begin 30 days after the emails are sent, and the borrower’s loan servicer will let them know when it is complete.
If you’re making payments, which are due again sometime in October after a three-year payment freeze, they’ll be paused until the debt is cleared.
(Borrowers who wish to opt out for any reason must notify their loan servicer.)
Where can I find my updated payment account?
You probably won’t be able to collect this information for a while, and probably not until next year. Loan servicers are still waiting for the Department of Education to update those numbers, so it’s unlikely you’ll call your servicer for new information.
The Education Department said that once all borrowers eligible for debt cancellation were processed, they would update the payment counts of other borrowers.
Any month counted can also be applied toward public service loan forgiveness, as long as you can document that you worked for a qualifying employer during the same period.
