Tag Archives: forgiveness

This Pause Is Giving Me Pause

Leave a reply

In March of 2020 everything changed in the world as we knew it.  Everything closed down.  Masks were pervasive.  Toilet paper was a hard-to-find commodity.  And my least favorite task was bathing the groceries.  But as the pandemic moved forward, we learned more about the virus.  Treatments and preventative vaccines were created.  And now everything feels a lot more like normal.  Well….almost everything.  Student loan repayment seems even more up in the air now than it did at the beginning of the pandemic.

In March 2020 the President announced a pause on federal student loan repayment, as well as setting the interest rate on all Federal Direct Student Loans to 0%.  This was supposed to last for a few months, until the public health emergency had passed.  But we all know now that the public health emergency did not end after a few months.  And neither did the loan repayment pause.  The pause has been extended several times.  It really looked like repayment (and the accrual of interest) was going to resume in January 2023.  It was supposed to coincide with the processing of loan relief in the form of up to $20,000 in forgiveness for qualifying borrowers.  But that loan forgiveness program got all tangled up in law suits and we’re really not sure when that will be resolved.  So the pause was extended yet again.  And this time the end date is a moving target.

Last week the U.S. Department of Education announced that the payment pause would end sixty days after a) they are allowed to implement the debt relief program, or b) the litigation is resolved.  If neither of these things happens by June 30, 2023, then repayment (and the accrual of interest) will resume 60 days after that.

Clear as mud?  Yep.  I have long thought that the federal student loan programs are too complicated for the average borrower to understand thoroughly.  There are too many different repayment plans.  There are origination fees deducted from loan amounts that make borrowing less transparent than it ought to be.  Loan servicers have a known history of not being up front with borrowers when they call with questions.  Loans come with something called a “variable fixed” interest rate, so each year brings a new loan with a different interest rate from prior loans.  And these interest rates are much higher than rates on car loans or home mortgages, which is very discouraging. It’s hard for me to keep up with all of the details, and I spend my whole life living in the student loan world.  I can’t imagine how intimidating it must be to a brand new college freshman.

But here we are.  Student loans were complicated enough before our country started using student loan borrowers as political punching bags.  Borrowers are now caught in the crossfire of arguments about many different policies.  I’m still not sure how I feel about the proposed debt relief program currently tied up in the courts.  But I feel very strongly that student loan borrowers shouldn’t be made to suffer because of the political battles of others.  And I guess that’s why the payment pause was extended yet again.

Will this be the last extension of the pandemic payment pause?  Only time will tell.  But if there is something to know, you can be sure I’ll share it here when that time comes.

Student Debt Relief Details

Leave a reply

At the end of August President Biden announced a plan to forgive up to $20,000 in Federal Direct Student Loans for borrowers with income below $125,000 per year.  Shortly after that announcement, the legal challenges aiming to stop the program before it started came rolling in.  This past week a couple of those legal challenges were dismissed, which makes me think this forgiveness might actually happen (but then an appeals court blocked progress on Friday evening, so we can’t be sure).  Without any fanfare, the application for debt relief opened this past week.  And people have been submitting the application in droves!

You may be eligible to receive forgiveness of up to $10,000 if you meet the following conditions:

  • You have an outstanding federal direct loan (subsidized, unsubsidized, graduate PLUS, parent PLUS, or direct consolidation) that disbursed prior to June 30, 2022.  If you borrowed your first loan for the current academic year, you are out of luck.
  • Your adjusted gross income from your 2020 or 2021 tax return was less than $125,000 for single filers, or less than $250,000 for families.  You can use either year’s income—whichever is lower.  If you were classified as a dependent student for the 2021-22 academic year, then your family’s income will be used rather than your own to determine your eligibility.

You may be eligible to receive up to an additional $10,000 in forgiveness (for a total of up to $20,000) if you received a Pell grant as an undergraduate student.  If you don’t recall whether you received a Pell grant, you can find out by logging in at http://studentaid.gov and selecting “My Aid.”  The “Grants” tab will reveal whether you received a Pell grant.

You may not need to do anything to receive this forgiveness.  If the Department of Education already has your income information on file, your forgiveness can be processed without your having to take any action.  If you submitted a 2022-23 FAFSA, you should be all set (though the Department of Education may follow up for parent information if you were a dependent student for 2021-22).  If you submitted 2020 or 2021 income information to your loan servicer in order to be on an income driven payment plan, then you should also be all set.

If your income info is not already at hand, you will need to submit the application for debt relief before December 31, 2023 in order to receive this relief.  The form is very simple.  If you know your name, date of birth, email address, phone number, and Social Security Number you should be able to complete it in two minutes or less.  After submitting the form you should receive a confirmation email. The Department of Education will contact you if more information is needed.  Once the application is approved, you will be notified, and then your loan servicer will be in touch to let you know what your new loan balance is and what your new monthly payment amount will be.

It sounds really simple.  I hope it actually turns out to be that simple.  But it certainly can’t hurt to try.  If you  are eligible….bring on the debt relief!!

 

What’s New(ish) in Student Loans

Leave a reply

Throughout the pandemic some interesting things have been happening in the world of student loans—some pandemic-related and others that just fell into this timing.  And if you have student loans, you really should know what is going on.

The Pause

In March 2020, when the pandemic started to hit hard in the U.S. and we learned all about lockdowns and quarantines, all federal student loans (including Direct Subsidized/Unsubsidized and Grad PLUS) were placed in a payment pause.  The idea was to make life easier for student loan borrowers while we all deal with this whole global pandemic thing.  For those in loan repayment, this made it so the required minimum payment on loans has been $0.  And the pause has had another benefit that has helped those currently in school as well as those in repayment:  during the pause the interest rates on all federal student loans have been set to 0%.  This means that no interest has been accruing on federal student loans for almost two years.  That adds up to thousands of dollars in savings for a typical law student.  The pause has been extended a couple of times as the pandemic has dragged on, and it is currently set to expire on May 1, 2022.  If there is not another extension, on May 1 loans will go back into repayment and their interest rates will reset to their original rates.  Brace yourself…it is coming.

The Loan Servicer Shuffle

When a student borrows a Federal Direct student loan, those loans are each assigned to a loan servicer contracted by the Department of Education (ED) to be in charge of managing that loan until it is repaid.  In the year 2021 three major loan servicers decided not to extend their contracts with ED and are exiting the Direct Loan servicing business.  Granite State Management and Resources is the smallest of these three.  Granite State loans will be transferred to EdFinancial, another experienced Direct Loan Servicer.  The other two servicers exiting the business are much larger and will impact a larger number of borrowers.  Navient (formerly a part of Sallie Mae) will be moving their loan portfolio to Aidvantage, which is a division of Maximus Education.  Maximus is experienced in Direct Loans as the collection agency that works on defaulted loans for ED.  Finally, FedLoan Servicing (a division of PHEAA), the servicer that handles all Public Service Loan Forgiveness loans (in addition to many others), will be transferring all of their Federal Direct Loans to MOHELA, yet another experienced Direct Loan servicer.  What this means is that if your loans are currently held by Granite State, Navient, or FedLoan Servicing, your loans are on the move.  If you have not already received notification that your loan has been transferred, that notification will be coming soon.  This does not change any of the terms of your loan.  It simply changes who you need to be in contact with regarding the loan.  Also, if you were on an income-driven payment plan and your loan has moved to a new servicer, you should contact that servicer to make sure your income-driven plan is set up in your loan’s new home.

The PSLF Limited Waiver

The Public Service Loan Forgiveness limited waiver doesn’t really impact currently enrolled students, but I know I have some alumni readers out there who can benefit.  Plus I find this whole issue pretty fascinating.  When the Public Service Loan Forgiveness (PSLF) program first began, there was a lot of chatter on Capitol Hill about how expensive the program would be, assuming that everyone who ever thought about working in public service was going to have tens of thousands of dollars in loans forgiven.  But when we finally (several years later) arrived at the point where borrowers were eligible to apply for forgiveness, almost nobody was approved.  Maybe they had the wrong kind of job.  Maybe they had the wrong kind of loan.  Maybe they were on the wrong payment plan.  There are multitude of reasons why a borrower can be denied PSLF, and this limited waiver allows a reprieve for some of those reasons.  The “wrong kind of loan” issue can be corrected retroactively with a Direct Loan Consolidation.  The wrong payment plan issue can be waived during this time.  The wrong kind of work issue, however, cannot be overlooked.  ED did a deep dive review of all the applications that were denied, and found that many of them could be approved under the terms of this waiver.  And as an extra added bonus, many borrowers who had made additional payments after they were technically eligible for forgiveness had those extra payments refunded to them.  It’s been a huge help to a lot of public servants.  But it is, indeed, temporary. This limited waiver expires on October 31, 2022.  So if you are in repayment and think you may benefit, it is important that you complete the PSLF Help Tool  before the end of October in order to make sure as many payments as possible count toward your 120 qualifying payments needed to earn forgiveness.

There’s been a lot happening behind the scenes in the world of student loans over the last two years.  I hope this helps to keep you in the know.  Questions can always be directed to your loan servicer.  Or to your friendly neighborhood law school financial aid director who always enjoys talking to students and alumni alike.