White House Raises the Curtain on Student Loan Forgiveness

The White House has been promising to issue guidelines on forgiveness of federal student loans since last spring. Starting Aug. 24, with additional information out over the following days, those guidelines are becoming clear. And on Aug. 25, information about how to apply for these benefits became available. This is good news for most who hold student loans.

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Here are the broad outlines of what’s possible for federal student loan holders:

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1) Up to $10,000 of loan balances to be erased for those who participated in the U.S. Federal Student Loan program

2) Individual tax filers who earn up to and including $125,000 per year are eligible; that amount doubles for married couples ($250,000) when both spouses have taken out federal student loans.

3) The forgiveness amount doubles — to $20,000 — for those whose loans were in the form of Pell grants (usually reserved for low-income loan applicants or members of low-income households).

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The Washington Post has published a special loan calculator that allows users to enter their loan balances and types to calculate the amount that could be forgiven, for those who apply.

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Who Benefits from Loan Forgiveness?

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The Aug. 24 Post story on this topic speaks to negative Republican reactions to this program. A big beef among Republican lawmakers is that loan forgiveness does nothing for those who never took our federal student loans in the first place. Individuals who never went to college make up a big chunk of the party’s base, so it’s an understandable appeal to public sentiment among such citizens.

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That said, the paper’s rejoinder to such arguments is worth quoting at length:

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“Biden gave a robust defense of the policy, touting that it is designed to deliver the greatest benefits to the neediest borrowers. The White House estimates that nearly 90 percent of relief will go to people earning less than $75,000, and that roughly 20 million borrowers could have their debt completely canceled.”

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If you look back at the items I’ve written for GoCertify on this topic, you can’t help but notice this is entirely in keeping with my own suggestions on how much forgiveness should go to which borrowers.

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Application for Forgiveness: Coming Soon

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In an Aug. 26 follow-up story, the Post asserts that application forms for student loan forgiveness will become available in early October. The story quotes White House National Economic Council deputy director Bharat Ramamurti, who says the form will be available through the U.S. Department of Education.

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Once that application is public, borrowers should file by mid-November, said Ramamurti. The program will remain open for application until the moratorium on student loan payments expires at year’s end.

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The story also reported that of the 8 million or so borrowers who already have provided income data to the Department of Education, their loans will obtain maximum allowable forgiveness with no application required. Sounds like the Feds may actually be trying to make things easier for those people, if one can imagine such a thing.

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As I’ve said before, I see this program as a great boon for those who can benefit most from easing their debt burdens. I’m glad the White House decided to include means testing as part of the conditions to qualify for forgiveness. I’m also glad that those most likely to see their financial circumstances improve are those now most likely to get that chance.

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According to the White House, more than 90 percdentof those who will have loan balances forgiven earn less than $75,000 per year. And as many as 43 million Americans could benefit from this program. Good-oh!