ROCHESTER, N.Y. (WROC) — The Biden Administration is getting ready to launch the largest student loan forgiveness program in history.
Within days, millions of borrowers are expected to fill out applications to receive up to $20,000 in debt forgiveness. The president says the program will help more than 40 million Americans and eliminate student loan debt for roughly 20 million people.
News 8’s Ally Peters spoke with CPA Garrett Wagner, with the New York State Society of CPAs, to discuss how this forgiveness program works.
Can you explain what this latest government program means for people with student loans?
“You might be surprised to hear this, but this is actually a three-part plan. The part that involves debt forgiveness gets all the attention in the press, so we’re going to take a moment and break it down a little bit,” Wagner said.
Part one of the plan is for all federally-held loans. Officials extended forgiveness until Dec. 31 of 2022.
“Extension will be automatic for everyone with a federal student loan, which means it’s easy, you don’t have to do anything but resume payments come January of 2023,” Wagner said.
“Now I’m going to jump to number three, because this one’s the simplest. It’s a plan to make the student loan system more manageable for future borrowers, and they’re still kind of figuring that out.”
Step two is the biggest part of the plan, which provides debt relief to low- and middle-income families, up to $20,000.
“Specifically, people are eligible for up to $20,000 in debt relief, or Pell Grants, and up to $10,000 in debt relief for non-Pell Grants,” Wagner said. “Borrowers are eligible for this relief if their income is less than $125,000, they’re single, or $250,000, for a household.”
Wagner said borrowers who are employed by nonprofits, the military, federal or state governments, tribal organizations and local governments could be eligible to have all of their student loans completely forgiven.
The debt forgiveness program has drawn criticism from some lawmakers and is subject to several lawsuits.
What do people have to do to receive this forgiveness?
“The government is trying to make this easy. Right now, they’re saying for nearly 8 million people, that they will automatically be qualified, and they will only need to take action if they want to opt out or forgiveness,” Wagner said. “For everyone else, you can complete a forgiveness application at the website, studentaid.gov and they’re saying those web applications will be available sometime in October.”
Wagner said within six weeks, people will be notified of the status of their application.
You mentioned forgiveness of up to $20,000 and up to $10,000. How is the amount determined?
“Your relief is capped at the amount of your outstanding debt when you apply for forgiveness. So, the max is $20,000, but if you only had $15,000 remaining on that Pell Grant, you’re only going to receive $15,000 in relief,” Wagner said.
Anything else people should know?
“Anytime there’s a governmental program that offers loan forgiveness, any kind of free money, we see all kinds of scams pop up. So, if you’re watching this, and you get a call, you see an ad online, you see an email where someone’s saying they will help you with your student loan forgiveness, or a price for a fee for whatever, it’s a scam,” Wagner said.
“They’re trying to take advantage of you. They’ll take a lot of money to do a simple application, so avoid that at all costs. If you have questions, though, reach out to your favorite CPA, I know we’ll be glad to help.”
To contact the New York State Society of CPAs, click here.