$3B in student loan debt will be discharged for 57K Floridians. Do you qualify?
Florida has nearly 57,000 student loan borrowers who are eligible to have their loans discharged through debt relief provided by President Joe Biden’s income-driven repayment (IDR) plans.
The Biden administration and the U.S. Department of Education announced that student loan forgiveness initiatives were moving forward that will provide $39 billion in total student loan forgiveness for 804,000 borrowers through IDR plans.
These discharges are a result of fixes implemented by the Biden administration to ensure that all borrowers have an accurate count of the number of monthly payments that qualify for forgiveness under IDR plans, according to the DOE.
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The fixes are an attempt to address “historical failures” in the administration of the federal student loan program in which qualifying payments made under IDR plans that should have moved borrowers closer to forgiveness were not accounted for.
“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” said Under Secretary of Education James Kvaal. "Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”
Here is what student loan borrowers need to know about automatic loan forgiveness.
Who qualifies for automatic loan forgiveness?
Borrowers must have made 240 or 300 monthly payments, equivalent to 20 and 25 years, to qualify. The number of required payments varies based on when the borrower first took out the loans, the type of loans they borrowed and the IDR payment plan in which the borrower is enrolled.
California, Florida and Texas have the most eligible borrowers. Florida has 56,930 borrowers approved to have their remaining student debt canceled, amounting to just over $3 billion in discharges.
How do you know if you qualify for automatic loan forgiveness?
The DOE began notifying qualifying borrowers via email two weeks ago. It will continue notifying borrowers who reach the applicable forgiveness threshold every two months until next year when all currently ineligible borrowers will have their payment counts updated.
Borrowers who receive notifications include those with Direct Loans or Federal Family Education Loans held by the DOE, including Parent PLUS loans of either type, who have reached the necessary forgiveness threshold as a result of receiving credit toward IDR forgiveness for any of the following periods:
Any month in which a borrower was in a repayment status, regardless of whether payments were partial or late, the type of loan, or the repayment plan;
Any period in which a borrower spent 12 or more consecutive months in forbearance;
Any month in forbearance for borrowers who spent 36 or more cumulative months in forbearance;
Any month spent in deferment (except for in-school deferment) before 2013; and
Any month spent in economic hardship or military deferments on or after Jan. 1, 2013.
In addition, the months described above that occurred before a loan consolidation will also be counted toward forgiveness.
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When do student loan payments resume?
Student loan interest resumes on Sept. 1 and borrowers must resume payments in October. The DOE will notify borrowers before payments resume, and loan servicers will also send billing statements and notices at least 21 days before the payments are due.
How to prepare to pay back student loans
The Federal Student Aid office says that borrowers should make sure they have a StudentAid.gov profile set up, and make sure that their contact information is current. Those who don’t already have a profile are encouraged to make one so they don’t miss out on crucial updates and so that they can apply for repayment plans and complete loan counseling.
Borrowers should also contact their loan servicer as soon as possible as they will likely see an influx of calls. USA Today reported that loan servicers will also likely have fewer resources to take on these calls after the Department of Education cut the pay loan servicers earn servicing each borrower and the minimum number of hours customer service centers must be open each week.
Borrowers who can should consider resuming their payments now while interest rates are still 0% as 100% of those payments will go toward the principal.
What help is available if I can’t afford my student loan payment?
Biden and the DOE have taken steps to provide borrowers with access to affordable payments going forward by creating the Saving on a Valuable Education (SAVE) Plan.
The SAVE Plan cuts payments on undergraduate loans in half compared to other IDR plans. A single borrower who makes less than $15 an hour will not have to make any payments and borrowers earning more than that will save more than $1,000 a year on their payments compared to other IDR plans.
The plan increases the income exemption from 150% to 225% of the poverty line, eliminates 100% of the remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan and excludes spousal income for borrowers who are married and file separately.
These new changes will go into effect later this summer, with more benefits going into effect on July 1, 2024.
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How to apply for the SAVE Plan
If you are already enrolled in the REPAYE Plan or if you sign up for the REPAYE Plan today, you will automatically be put on the SAVE Plan when it goes into effect on July 1, 2024.
You can also select the option for your loan servicer to place you on the lowest monthly payment plan, which will usually be the REPAYE Plan.
The SAVE Plan will replace the REPAYE Plan when it goes into effect.
The application for the new SAVE Plan will be available later this summer. You can also sign up by contacting your loan servicer directly.
How much will I pay each month?
While the full SAVE Plan regulations won’t go into effect, some of the plan’s cost-saving measures will begin later this summer. If you make $32,800 a year or less, about $15 an hour, your monthly payment will be $0.
Here is a chart showing estimated monthly payments under the SAVE Plan, according to the DOE.
SAVE Plan benefits going into effect in 2024
The Federal Student Aid website lists several more benefits that will go into effect in July 2024, providing more ways payments will likely be reduced:
Payments on undergraduate loans will be cut in half (reduced from 10% to 5% of income above 225% of the poverty line). Borrowers who have undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based on the original principal balances of their loans.
Borrowers with original principal balances of $12,000 or less will receive forgiveness of any remaining balance after making 10 years of payments, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed. Payments made previously (before 2024) and those made going forward will both count toward these maximum forgiveness timeframes.
Borrowers who consolidate will not lose progress toward forgiveness. They will receive credit for a weighted average of payments that count toward forgiveness based upon the principal balance of the loans being consolidated.
Borrowers will automatically receive credit toward forgiveness for certain periods of deferment and forbearance.
Borrowers will be given the option to make additional “catch-up” payments to get credit for all other periods of deferment or forbearance.
Borrowers who are 75 days late will be automatically enrolled in IDR if they have agreed to allow the Department of Education to securely access their tax information.
This article originally appeared on Pensacola News Journal: Student loan forgiveness plan to erase $3B in Florida. Do you qualify?
