Tens of thousands of borrowers with federal student loans are probably wondering: Is my debt load about to get a little lighter?
The Biden administration announced on Friday that more than 800,000 borrowers would have their remaining loan balances erased, a total of $39 billion, as part of a program to address past errors made by loan servicers who failed to give payment credit where it was due — or who may have provided poor advice when borrowers called for assistance.
In the coming days and months, thousands of borrowers will learn whether they received an account adjustment resulting in enough qualifying payments to eliminate their loans — a process that will continue until the end of the year. After that, borrowers who don’t yet have enough qualifying payments for cancellation will receive their updated payment counts.
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 F.F.E.L., program and held by the Education Department may qualify, including borrowers with Parent PLUS loans.
But borrowers are eligible for debt cancellation only if they have reached a certain threshold, or if they’ve accumulated the equivalent of either 20 or 25 years of qualifying months. For most borrowers, that means you will need to have been in repayment for 240 or 300 months in either an income-driven repayment plan (where payments vary based on a borrower’s income and family size) or a standard repayment plan.
The precise number of qualifying payments will vary depending the borrower’s loan type and the payment plan the person is enrolled in.
How do I know if I received extra credit for payments?
Borrowers’ updated payment count will include any month they were in repayment — regardless of the type of loan, the repayment plan used, or whether payments were partial or late.
But they’ll also get credit for any period they 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 deferment — except for in-school deferment — before 2013 will also count. The same goes for any month spent in economic hardship or military deferment on or after Jan. 1, 2013.
The situations outlined will also count if they happened before you consolidated your loans.
When will debt cancellation start?
Immediately.
The Education Department said it would inform borrowers if they had enough payments for cancellation with no further action on their part — and they would continue to notify borrowers who reached the debt elimination threshold every two months until next year.
Debt discharges will begin 30 days after emails are sent — and the borrower’s loan servicer will let them know when it’s completed.
If you are making payments — which will become due again sometime in October after a three-year payment freeze — those will be paused until the debt is eliminated.
(Borrowers who want to opt out for any reason should notify their loan servicer.)
Where can I find my updated payment count?
You probably won’t be able to gather this information for a while — and probably not until next year. The loan servicers are still waiting for the Education Department to update those numbers so calling your servicer is unlikely to yield any new information.
The Education Department said that once they processed all borrowers eligible for debt cancellation, they would update other borrowers’ payment counts.
Any months 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.