Federal student loan forgiveness application opens early

Federal student loan forgiveness is still on schedule, but the application process has begun early for students who want to get a head start.

On Oct. 14, the Federal Student Loan Debt Relief application opened in an early testing phase, allowing loan borrowers to submit their information ahead of the full launch scheduled later this month. In this beta period, the application will be available on and off, so students can check back if they are unable to access it.

The application takes less than five minutes to complete, requiring only the borrower’s legal name, social security number, date of birth and contact information. Students who apply early will not need to resubmit after the official launch.

After launch, the application will be open until Dec. 31, 2023, but the debt relief program will apply only to loans disbursed before June 30, 2022. A paper application form will also be available.

Applicants will receive email confirmations after submission and approval. The federal government will notify loan servicers, who will apply debt relief directly to borrowers’ accounts.

Eligibility guidelines remain the same as when the debt relief program was first announced: Individual borrowers qualify with an income of less than $125,000 in 2021 or 2020 while dependent borrowers qualify with a family income of less than $250,000 in 2021 or 2020. Federal Pell Grant recipients may receive up to $20,000 in loan forgiveness while non-Pell Grant recipients may receive up to $10,000.

The federal government will verify eligibility based on tax records and may contact applicants to request further information. Eligibility of dependent borrowers — defined for federal student aid purposes as most students born in or after 1998 who are unmarried and are undergraduates this year — is based on their parents’ income.

Those who have made voluntary payments toward their student loans during the pandemic payment pause from March 13, 2020, through Dec. 31, 2022, may be eligible for an automatic refund if their current loan balance is below their approved debt relief amount. For example, if a borrower eligible for a full $10,000 in debt relief originally owed $10,000 and paid $2,000 during this period, the debt relief would cover their remaining balance of $8,000 and refund them the $2,000.

Some borrowers may be automatically enrolled for debt relief without applying. Anyone who decides to opt out must do so by contacting their loan servicer. Forgiven debt will not be taxed federally but may be taxed in some states; Colorado follows federal tax regulations and will not tax loan forgiveness as income.

The U.S. Department of Education advises that students be wary of scams as the loan forgiveness process begins. Companies that charge a fee in exchange for help with the debt relief process are not affiliated with the Federal Student Aid office.

Photo from usatoday.com.