What you need to know about student debt relief

WASHINGTON — Following initial enthusiasm over President Joe Biden’s student loan forgiveness program that crashed an Education Department website, applications for relief are expected in the coming weeks and those interested should begin preparations now.

The controversial program has met political division in Congress, but the Education Department is moving forward with the plan targeting low- and middle-income borrowers who will need to qualify to have their loan balances reduced or eliminated.

That enthusiasm for the program prompted a crash of an Education Department website on Aug. 24 when Biden first announced the program to eliminate up to $20,000 in debt for those who attended college and received Pell Grants, and $10,000 for others with federal student loan debt.

Another website operated by a loan service provider, Nelnet, tweeted about high volumes that caused delays, but that online site is up and running as is the Education Department site.

Here are some things you need to know about the program:

Cost to taxpayers

Biden’s announcement of the student loan forgiveness program fulfills a campaign promise, although the plan falls short of the $50,000 in loan cancellation sought by liberals. The spending has been criticized by conservatives as a tax burden to others and an increase to the federal deficit.

Cost of the student loan forgiveness plan ranges from the $230 billion cited by the White House to between $400 billion and $600 billion estimated by the nonpartisan Committee for a Responsible Federal Budget.

The program follows previous Biden executive action totaling more than $30 billion in student loan forgiveness for disabled borrowers and for people who were victims of fraud by for-profit institutions.

Applications

Although heavy volume continues, the Education Department application for loan repayment forgiveness is not yet available, but should be up soon on the website, StudentAid.gov, Biden administration officials said.

And administration officials also urge those who plan to seek assistance to sign up online now to be notified when the application becomes available.

Deadline

The deadline for applications for loan forgiveness is Dec. 31, when loan payments that were paused under coronavirus relief legislation resume. The Biden administration recommends those seeking relief plan to apply before Nov. 15.

The White House estimates about 43 million student loan borrowers are eligible for forgiveness, with roughly 20 million who could see their debt eliminated. State-by-state projections were not immediately available.

Education Department media representatives did not respond to specific questions about the volume of inquiries or the regional breakdown of projected applicants.

Nevada loan debt

But a student debt study by The Institute of College Access and Success showed that 48 percent of graduates from the University of Nevada, Reno in 2019-20 had an average of $22,610 in education loan debt, and 46 percent of graduates from UNLV had $19,605 of debt.

The study found that the average student loan debt nationally in 2020 ranged from $18,350 in Utah to $39,950 in New Hampshire.

The amount of education debt by graduates nationwide, and Biden’s forgiveness plan, are acknowledgments that the higher education system relies heavily on student debt, according to The Institute of College Access and Success. But systemic reforms are needed to make college more affordable.

Income eligibility

Eligibility for loan forgiveness under the president’s plan is determined by an income threshold.

Only borrowers earning less than $125,000 per year, or less than $250,000 for couples who file federal taxes jointly, are eligible.

The federal loan forgiveness is tax-free for federal filers, but about a dozen states will tax the benefit as income. Nevada does not have a state income tax.

Once the applications for loan forgiveness are published online by the Department of Education, filled out by applicants and income eligibility is certified, the process begins and forgiveness or elimination of outstanding debt could come as early as this year.

The program does not apply to private loans not under the Education Department.

Parent Plus

Biden’s loan forgiveness plan does include what’s known as the Parent Plus program, which allows parents to take out loans to pay for a child’s higher education. Forgiveness is limited to $10,000 and subject to the same income thresholds.

Some borrowers in the Federal Family Education Loan Program, under the Education Department, may qualify due to income levels, although most of those loans are managed by private companies and may need to be consolidated with public programs. Details on consolidation will be available on the StudentAid.gov site.

Contact Gary Martin at gmartin@reviewjournal.com. Follow @garymartindc on Twitter.