South Dakotans with student loan debt can see up to $20,000 of it forgiven in the coming months, but only if they know how, where and when to apply for that forgiveness.
The Biden administration announced its new student loan forgiveness plan on Aug. 24, but that forgiveness won’t be automatic for most people.
While nearly 8 million of the total 40 million borrowers may already be eligible to receive relief automatically, because their relevant income data is now available to the Education Department, the remainder still need to apply beginning in October. And, nearly 20 million borrowers could see their entire remaining balances discharged, according to the White House.
Borrowers in the U.S. will be able to begin applying for relief beginning in October, and must apply before Nov. 15 for their adjustments to be reflected in monthly student loan payments that will start back up in January. Relief could come within four to six weeks after borrowers fill their applications out.
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Borrowers have not had to think about how they will make their monthly payments on most federal student loans for nearly three years now. A moratorium began March 2020 and the payment pause has been repeatedly extended. But the moratorium ends Dec. 31 and payments will resume in 2023. If you miss the deadline, you can still apply until Dec. 31, 2023.
Those with student loan debt may see up to $10,000 of it forgiven in the coming months, or up to $20,000 of it forgiven if they received a Pell grant during college, provided they make under $125,000 or $250,000 for a household.
In South Dakota, there are more than 109,000 borrowers, including more than 65,000 with Pell grants, according to the White House. Debt relief under this new, limited program will not be included as part of your taxable income on your federal income tax return, according to the White House.
President Joe Biden’s loan forgiveness plan also caps payments for current low-income students and forgives loan balances after 10 years, rather than 20, for borrowers with original loan balances of $12,000 or less.
Before the application is available online in October, update your contact information with your loan servicer at StudentAid.gov. You can visit StudentAid.gov/DebtRelief to keep up with what’s likely to be a complex process involving student loan forgiveness.
Relief will apply to loans in the following order, according to the Education Department:
If you have multiple loans in the same program, forgiveness first applies to the loans with the highest rate. If rates are the same, unsubsidized loans would be forgiven before subsidized loans. If interest rate and subsidy status are the same, the forgiveness would first apply to the most recent loan.
If the interest rate, subsidy status, and disbursement date are the same, the Education Department said, forgiveness would apply to the loan with the lowest combined principal and interest balance.
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For the 7.5 million Americans in default on their federal student loans, the Biden administration plans to execute a “Fresh Start” initiative to help borrowers exit default so their wages, tax refunds and other benefits aren’t seized.
Most borrowers in default on their federal loans should be able to see some student loan debt forgiven, in some cases removing the default from their credit history. As a result, some borrowers could qualify for new credit, such as auto loans and mortgages, and dig themselves out of a financial hole.
The Fresh Start program will enable borrowers to qualify for federal student aid again, so they might be able to finish their education and have an opportunity to avoid debt collection for at least a year.
The borrower must call the “Default Resolution Group” at 800-621-3115 and ask for the Fresh Start program. See StudentAid.gov/FreshStart for details.
On Wednesday, the U.S. Census Bureau released an analysis of which groups of former students are likely to get debt relief through the plan. Among its findings:
