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How To Apply For Student Loan Forgiveness 2022

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President Biden’s recent announcement that holders of student loans can qualify for forgiveness of up to $20,000 has raised many questions. While we don’t yet have 100% clarity on how this process will work, let’s look at what we know and how this will affect your ability to qualify for a mortgage loan.

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How Much Loan Forgiveness Is Available?

There are two levels of loan forgiveness available:

  • Up to $20,000 in loan forgiveness – for those who received a Pell Grant in college

The rationale here is that the Pell Grant process identifies those with the greatest financial need at the time of application.

  • Up to $10,000 in loan forgiveness for those who did not receive a Pell Grant in college

Who Qualifies For Student Loan Forgiveness?

President Biden’s plan focuses on those with limited ability to repay their loans due to their income levels. 

To qualify for student loan forgiveness, your income must be lower than $125,000 if filing your taxes as an individual or $250,000 if filing as a couple or head of household.

Presumably, if both members of a couple owe payments on student loans, and together they made less than $250,000, they will both qualify for student loan forgiveness under this program.

What Time Period Is Considered For The Income-Based Qualification?

Though we do not yet have all the details on this, a senior White House official has indicated that a person can qualify for forgiveness if their income from either 2020 or 2021 was below the income limits of $125,000 for an individual or $250,000 for a couple.

Given that a large number of people experienced a loss or pause in their employment due to Covid-19, this likely opens up opportunities for more people to receive loan forgiveness.

What Does Up To $10,000 Or Up To $20,000 Mean?

The answer’s simple: if you owe $8,000, you can receive $8,000 in forgiveness, even if your income/Pell Grant circumstances would qualify you to receive a higher amount. You cannot receive forgiveness for more than you owe.

What If I Continued To Pay Off My Student Loan During The Pandemic, And Now I Owe Less Than The Amount For Which I Qualify?

Great question. Even though all student loan payment requirements (and interest accumulation) were paused as of March 13, 2022 and this pause continued throughout the pandemic; many people chose to continue to make payments anyway. 

For example, let’s say that you continued to make payments on your student loan during the pandemic, even though you weren’t required to do so. During that time, you paid $3000 down on your loan, and your current loan balance is $6,500. How much loan forgiveness do you qualify for, $6,500 or $9,500?

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For those whose payments during the pandemic pause decreased their current loan balances below the $10,000/$20,000 limit, they will receive forgiveness for the amount they still owe plus their payments during the pause, up to the full amount of forgiveness for which they qualify. 

All of this will be part of the loan forgiveness application and process coming out in October.

Will I Get This Relief Automatically, Or Will I Have To Apply For It?

Most people will have to fill out an application, proving their income levels to qualify. 

There is a group of approximately 8 million people who already have their income on file with the government and won’t have to apply. At this point, we don’t know exactly who those 8 million people are or how they will know they don’t need to apply. We do know that you can sign up for email updates here to get more information as it becomes available.

Applications will become available in early October, and you will have up until December 31, 2023, to apply, but the administration recommends submitting your application by November 15, 2022, to receive forgiveness before the payment pause ends on December 31, 2022.

The government will continue to process applications as they are received up until December 31, 2023.

How Long Will It Take To Receive My Forgiveness

Current plans call for forgiveness within 4 to 6 weeks after application.

How Do I Know If I Received A Pell Grant?

You can check to see if you received a Pell Grant while in college by logging into your Federal Student Aid site. Navigate to the “Aid Summary” page on that site, to see the loans and grants you received, plus the current balances due on the loans you received.

You do not have to have received a Pell Grant every year of your college education to qualify for the $20,000 in debt forgiveness. You can qualify if you only received a Pell Grant for one year.

Do I Have To Have Graduated To Qualify For Forgiveness?

No, you do not have to have graduated to qualify for forgiveness. 

What If I’m Still In School? Can I Still Qualify For Forgiveness?

Yes, you can still qualify for loan amounts disbursed by June 30, 2022.

What If I Paid Off All My Student Loans Prior To The March 13, 2022 Payment Pause?

No forgiveness is available for student loans paid off prior to March 13, 2022.

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What Types Of Student Loans Qualify?

If your loan was a federal student loan, you probably qualify for forgiveness. This includes direct subsidized loans, unsubsidized loans, grad PLUS, and parent PLUS loans.

Private student loans are not eligible for forgiveness.

At this time, it is unclear whether private education loans like Perkins loans and Federal Family Education Loans (FEELs) will qualify for forgiveness. If you have a FEEL loan and it was eligible for a student loan payment pause during the pandemic, you can qualify for forgiveness.

However, about half of FEEL loans are held by private lenders. Many of those were not eligible for the payment pause. The government is working to make those loans available for forgiveness. 

Will Forgiven Amounts Be Taxable Income?

The Biden administration assures us it will not be taxable on a federal level, and they are instructing lenders not to issue the forms that turn these forgiven amounts into federally taxable income.

What About The States? Will Forgiven Loans Be Taxable By My State?

Though the federal government cannot control the state taxing authorities, they are strongly encouraging states not to consider forgiven amounts to be taxable income.

If My Balance Is Not Totally Forgiven, What Will Happen Once The December 31, 2022 Loan Payment Pause Deadline Passes?

If your forgiveness does not eliminate your balance due, your loan payments will resume in January 2023. 

However, depending on your balance, your required monthly payments, and your income levels, you may qualify for a lower monthly payment amount based on an Income-Based Repayment plan (see below.) Look for announcements on your student loan servicer’s website to discover how that process will work for you and the actions you will need to take to qualify for payment adjustments.

Will I Get A Check Or Just See My Amount Due Decrease?

We don’t have all the details on this question at this point. Presumably, if your forgiveness amount is less than your balance due, you will see your total loan balance decrease. If your forgiveness amount reduces your balance to $0, you will be able to celebrate as your amount due becomes $0.

If that is the case and you made payments during the pandemic loan pause period, you will be able to apply for a refund of those payments up to the amount for which you qualify, and it makes sense that a refund will be provided to you. More details on this will be provided by the government in the future.

I’ve Heard There’s A Program That Offers Complete Forgiveness, What Is It?

You’re right. Through the Public Service Loan Forgiveness program (PSLF), you can have the remaining balance of your loans forgiven after you’ve made 120 payments. To qualify you must work full-time for the federal, state, local, or Tribal governments. You can also qualify if you work for the military or a qualifying non-profit. 

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There is some urgency on this. There is a set of temporary changes that expire on October 31, 2022, that enable you to receive credits for past payments. Applications after November 1, 2022, will not be eligible for those special conditions, so if you qualify for this program, you should act on this immediately. You can learn more and apply by visiting PSLF.gov.

Other Changes In President Biden’s Announcement

Final Payment Pause Extension

The Covid-19 payment and interest accumulation pause, which has been extended multiple times during the pandemic, will expire December 31, 2022. After that, student loan payments will restart and payments will be required.

In addition, the Biden administration has proposed changes designed to reduce future payments for low and middle-income student loan borrowers, that could decrease or eliminate your payments, including:

Revision Of Income-Driven Repayment Plans

This change would require payments that are no higher than 5% of discretionary income (down from the 10% previously required) for those on income-based repayment plans.

Increase In The Amount Of Income Considered To Be Non-Discretionary

New changes would make it so that anyone making less than 225% of the federal poverty level (approximately $15/hour) would not have to make a monthly payment on their student loans if they are part of an income-based repayment plan.

Remove Unpaid Monthly Interest If Minimum Payments Are Made

Previous to this announcement, your loan balance could actually increase each month due to interest payments, even if you were making your monthly income-based loan repayments. Under Biden’s new plan, your loan balance will not be able to increase as long as you were making your required payments, even if your income was low enough that those required payments were $0.

Forgive Loan Balances For Loan Balances Of Less Than $12,000 After 10 Years Of Repayment

Previously, you would have had to make loan repayments for 20 years to qualify, now that occurs at 10 years.

How Will Student Loan Forgiveness And The Proposed Changes Affect My Ability To Get A Mortgage?

Actually, very little. 

There is a common misconception that if you have a student loan, you could not get a mortgage. That is not true.

How Student Loans Are Considered When You Apply For A Mortgage

Mortgage lenders don’t look at the total amount you owe on your student loan as part of the loan underwriting process. Instead, they look at your total required monthly payments (including your monthly student loan payments) as a percentage of your monthly income. 

Trying to Qualify for a Mortgage with Student Loans? Click Here for Help!

Most types of mortgage loans, they look at what appears on your credit report to determine what your required monthly payment is on your student loans. During the pandemic freeze, that amount has been $0, so your student loans have not been a factor during this period of time.

As repayments resume, those required payment amounts will begin reappearing on your credit report. However, if you are on an Income-Based Repayment plan, the required repayment amounts may not be your originally contracted amount. They will likely be a lower number, especially if the proposed changes that decrease the required repayment to 5% of discretionary income and the increase in discretionary income amounts go through.

In other words, it is very possible that you can qualify for a mortgage even if you have substantial levels of student loan debt, even after receiving forgiveness on your loans.

Let Us Connect You To A Mortgage Lender Who Can Help You!

After everything you just read, you’re probably wondering, how does this apply to me? Could I actually get a mortgage, given my individual circumstances?

Great question!  We specialize in helping people qualify for mortgages who may have been denied by other lenders. 

We’d love to connect you to a mortgage lender in your area who understands what it really takes to qualify, who can look at your specific situation, and answer your questions.

You can Ask Your Question here, and we will connect you with a Mortgage Expert in your area that can help, or you can find a Mortgage Expert Near You below this article.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

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