Over the last few weeks, the process of forgiving $10,000 or $20,000 for every student loan borrower in the United States as set forth by the Department of Education has been moving forward to this specific point. In the coming days and weeks we should begin to see the actual forgiveness affecting the student loan debt balances of individual federal student loan borrowers.
$10,000 or $20,000?
Every borrower who never accepted a Federal Pell Grant is eligible for $10,000 of forgiveness, and every borrower who ever accepted a Federal Pell Grant is eligible for $20,000 of forgiveness.
The Forgiveness Application
Within the last few days, the Department of Education has unveiled a preview of the online application required to receive the forgiveness for student loan borrowers who do not have their income information on file with the Department of Education. The Department of Education has guaranteed in writing that all student loan borrowers who have income documentation on file with the Department of Education will have the forgiveness applied to their student loan balances automatically. A small number of Hope Credit clients who have not yet provided their income documentation to their Hope Credit case worker will need to do so in order to have their forgiveness applied automatically as well. There are 2 situations where this is occurring:
- New Hope Credit clients who have not yet provided their case worker with proof of income so that their case worker can fill out the forms necessary to secure their chosen income based program.
- Existing Hope Credit clients who are currently due for recertification and have not yet provided their case worker with their updated annual income documentation.
If your Hope Credit case worker has been reaching out to you persistently by phone, text, and email it is most likely to try to secure your income documentation so that you can automatically have the forgiveness applied to your student loan balance. In addition, providing this information to your Hope Credit case worker will also keep you on track and already in good standing for your chosen income based program when payments resume January 1st, 2023.
Bad Faith Actors
A few days after the blanket student loan forgiveness announcement by the President of the United States and the Secretary of the U.S. Department of Education on August 24, 2022, some student loan borrowers have reported receiving phone calls from strangers claiming the ability to forgive amounts above $10,000 for non-Pell Grant borrowers and amounts above $20,000 for Pell Grant borrowers. This is not possible under current federal law. Hope Credit has maintained a commitment to inform our clients of the specific requirements to achieve forgiveness under federal law, and to inform our clients of changes to federal law that could reduce those requirements and/or increase applicable student loan forgiveness benefits. The perpetrators of these schemes are attempting to capitalize on the understandable confusion created by the many changes to federal law regarding student loan forgiveness that have occurred in the last 2 years. Please beware, some callers are spoofing their caller ID to appear to be the U.S. Department of Education, which is illegal. The U.S. Department of Education typically does not contact student loan borrowers by phone unless a support case has been initiated as the result of a prior communication.
Potential Forgiveness Lawsuits
Since the blanket forgiveness announcement by the President and the U.S. Department of Education on August 24th, 2022, several organizations and state governments have filed federal lawsuits to block the imminent forgiveness that we are scheduled to receive in the coming weeks. Any of these lawsuits could potentially derail or delay the scheduled forgiveness at any time before the funds have been disbursed. In the first of these cases to be presented to the courts October 12, 2022, the presiding judge declined the plaintiffs’ request to issue an injunction on the forgiveness and took no action at the current time. Although this case has much farther to go, and there are still more cases in the near future to go before the courts, this first action by the presiding federal judge was a positive sign that the lawsuits may not be able to derail or delay the blanket forgiveness from happening.
Unemployment or Reduction in Work Hours
As has always been the case with the Federal Student Loan Forgiveness Program, any student loan borrower who becomes unemployed or receives a reduction in income during this time may immediately apply for a recalculation of their student loan payments to reduce the monthly required payment to the DOE. Regardless of the extended payment freeze, a re-calculation is effective for 12 months, long after the relief period has expired. So again, if you have recently been laid off or experienced a decrease in income, now is the time to reset your monthly required payment to the Department of Education so that you can benefit from a reduced monthly payment when the student loan payment pause ends.
Suspension of garnishments and tax refund offsets are also extended to December 31, 2022
Although there are no clients of Hope Credit who are currently in a garnishment status with the federal government, many clients refer friends and family for help with their student loans. If any potential clients have consulted with our enrollment advisors and been told they were ineligible for the forgiveness program due to a garnishment status, there is now a window of opportunity to consolidate and enter into an income based forgiveness program, effectively bypassing default and collection status. Those potential clients can then enroll, have their loans consolidated, and be removed from defaulted status. Please contact your case worker if you know someone who can benefit from this grace period.