Student Loan Forgiveness - Q&A

Summit Wealth Advocates |

We received quite a few questions regarding the Student Loan Forgiveness piece we sent a few weeks ago and thought it may be beneficial to send a follow up piece sharing those questions and answers with everyone:

  1. How does the program work if loans are paid off already?
  1. If you paid off loans during the loan freeze, you can get a refund on those loans.  If you paid loans off prior to the loan freeze, you are eligible for loan forgiveness, just no refund.
  1. Would loan forgiveness be retroactive if we took out a new loan for our son? 
  1. It depends on when you take it out.  If you took it out before the 6/30/2022 deadline, the loan is eligible for the forgiveness program.  If it is taken out after, the loan will not apply for the forgiveness program.
  1. Is it currently for federal and nonprofit employees only?
  1. A federal loan is forgivable; a private loan is not.  Non-profit workers have a separate program where they can get the loans dismissed after 10 years of making payments, but that is separate from this forgiveness.
  1. I think I read somewhere that if a student was set up on an income driven repayment plan, there was a provision allowing for a refund on past payments up to the $10k (if the current owed balance was below $10k when forgiven)?
  1. As things stand currently, if your outstanding loan balance is less than the maximum amount of debt relief you're eligible for, you'll receive only relief of your full loan balance.  That said, you can request a refund for any payments made during the payment pause, which began on March 13, 2020.  The request would need to go through the loan servicer.  We weren’t able to find any information regarding the income driven repayment plan specifically.

If someone paid their loans down under their forgiveness level ($10,000 assuming no Pell Grants) during the COVID payment pause, it would benefit them to request a refund of their payments so they can receive the full relief amount.  We would certainly hope this would all be explained and included in the application process.

Q. When do applications open?

A. They hope to have the application portal opened by mid-October.

  1. My daughter just started her 4th year of college and has been taking out loans every year in addition to her scholarships and our contributions.  Our household income is below $250,000 and my daughter only works part time in the summer months.  Does this mean $10,000 of her loans will go away/disappear? 
  1. Likely, yes.

We will continue to post updates as we see them.