Why Over 7 Million Student Borrowers Might Miss Forgiveness
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The White House has repeatedly said its student loan forgiveness application, which is expected to go live within days, will be Easy.
Yet consumer advocates say any bureaucracy around relief is likely to miss out on millions of borrowers.
“Those who need it most won’t get it, and that will make politics more regressive,” said Thomas Gokey, co-founder of the Debt Collective, a national debtors’ union. “There will be a higher percentage of people making $124,000 a year applying than people making $30,000.”
Most people with federal student debt are eligible for a rebate: up to $10,000 if they haven’t received a Pell grant, which is a type of aid available to low-income undergraduate students. income, and up to $20,000 if they did.
Still, nearly 20% of eligible borrowers may not take the necessary steps to get this relief, according to the US Department of Education’s own estimate.
This amounts to more than 7 million people, explained higher education expert Mark Kantrowitz.
“I’ve seen too many examples where people assumed they weren’t eligible for something, but were actually eligible and ended up leaving money on the table,” Kantrowitz said.
The White House did not immediately respond to a request for comment.
Candidates may miss due to mistaken beliefs
A big reason some eligible borrowers may not apply is that they will mistakenly believe their income disqualifies them, Kantrowitz said. The relief is limited to borrowers who earned less than $125,000, or married couples or heads of households who earned less than $250,000, in 2020 or 2021.
However, the vast majority of people with student debt fall under those income limits, Kantrowitz said. “Most people who only have an undergraduate or master’s degree should qualify,” he said.
Yet others might not apply because they don’t know what their income was in 2020 or 2021. “Do you remember how much you earned two years ago?” said Kantrowitz.
Some borrowers, meanwhile, may have outdated contact information on file with their student loan officer and therefore do not receive relief updates, according to Kantrowitz.
You should ensure that your repairer, as well as the education department, has the most up-to-date contact information for you. You can ensure that the data is up-to-date at StudentAid.gov. You can also register on the government website to find out about the progress of the process.
Borrowers who aren’t sure if they’re eligible for the forgiveness might as well apply, said Douglas Boneparth, certified financial planner and president of Bone Fide Wealth in New York.
“The worst that can happen is that they don’t qualify,” Boneparth said. “There’s no downside to that. But if they qualify they could get some relief, and that can be huge.”
“It should only take a few minutes to submit an application,” he said.