How Biden’s Education Department will apply up to $20,000 in student-loan forgiveness to borrowers with multiple debt balances
- Student-loan borrowers can start applying for Biden’s relief in early October.
- If you hold multiple student loans, the Education Department has an order on which ones will get relief first.
- Borrowers will have until the end of 2023 to apply for student-loan forgiveness.
If you hold multiple separate student loan balances, President Joe Biden’s Education Department has a way to determine where its recently announced relief will go.
At the end of August, Biden announced up to $20,000 in student-loan forgiveness for federal borrowers making under $125,000 a year. But there was confusion following the announcement regarding who would be eligible and how to access the relief, which is why the department recently posted an FAQ on its website intended to answer questions borrowers may have.
While eight million borrowers are determined to be automatically eligible for relief if the department has their income information, the majority will have to apply for the debt cancellation through a form that will go in live in early October. Here’s how the department plans to allocate that relief if borrowers hold multiple student-loan balances, according to its FAQ:
If you have multiple loans, relief will be applied in the following order:
- Defaulted loans held by the Education Department
- Defaulted FFEL Program loans commercially held
- Non-defaulted direct federal loans and FFEL Program loans held by the Education Department
- Perkins Loans held by the Education Department.
If you have multiple loans within one program (like multiple Direct federal loans), relief will be applied in the following order:
- Loans with the highest interest rate
- If interest rates are the same, apply relief to unsubsidized loans before subsidized loans
- If interest rates and subsidy status are the same, apply relief to the most recent loan
- If all conditions above are the same, apply relief to the loan with the lowest combined principal and interest balance.
Once the application is live, the department recommends that borrowers apply before November 15 so relief can be fully processed before student-loan payments are set to resume on January 1, 2023. Borrowers will have until the end of next year to apply for this one-time blanket student-loan forgiveness.
This content was originally published here.