How do i know if i qualify for student loan forgiveness

President Joe Biden announced Wednesday that the administration would cancel $10,000 in federal student loans for most borrowers, fulfilling his campaign promise to bring student loan debt relief to millions of Americans.

The plan is limited to borrowers making less than $125,000 per year for individuals and less than $250,000 for married couples or heads of households. Pell Grant recipients who meet the income threshold are also included in the plan and can receive up to $20,000 in relief. Private loan holders are not eligible for relief. 

Although the announcement noted that an application for borrowers to apply for the program would be available "in the coming weeks," there's been little information on how borrowers can determine if they're eligible for the debt relief and what the application will entail. 

Nearly 8 million borrowers for whom the Department of Education has income information available, however, should be eligible to receive debt relief automatically, according to the announcement. 

Until the department provides more information on what borrowers need to do to receive relief, here's what you need to know and how you can prepare: 

How can I check if I qualify for student loan forgiveness? 

• Verify that you meet the income threshold by checking your 2020 and 2021 tax returns, as experts say that the administration will likely estimate your annual income from either, or both, of those forms. 

• Check if you are a Pell Grant recipient and qualify for additional relief by logging into your Free Application for Federal Student Aid (FAFSA) account with your FSA ID. The portal should have your student aid report (SAR), which details the different financial aid awards you have received, including any Pell Grants. This information is also included in the financial aid award letter you received from the school you attended. 

What do I need to do to get my loans paid off as part of the program? 

• Sign up for the department's "federal student loan borrower updates" emails to be notified when the application is live.
• Check your communication preferences on your FAFSA and loan servicer accounts so you know where, and how, these agencies will contact you about receiving debt relief. 
• Have documentation of the outstanding balance on your loans and copies of your recent tax returns prepared in case you need to prove your eligibility. 

'We're all sitting tight for more information'

Implementing a broad student loan forgiveness plan is going to be a "slow process" that requires "a lot of communication between the Department of Education and loan servicers," Michelle Dimino, a senior education policy leader at public policy group Third Way, tells CNBC Make It. "[Most] borrowers won't automatically see their balances be cleared or reduced … we're all sitting tight for more information." 

The administration's broader debt forgiveness plan is "incredibly problematic and confusing to borrowers" as it stands now, Scott Buchanan, executive director of the Student Loan Servicing Alliance, says, but he's optimistic that the details of the application process get "ironed out" and become "much clearer" in the coming weeks. 

"Education is a ticket to a better life. … but over time that ticket has become too expensive for too many Americans," Biden said during a speech from the White House hours after the announcement. "All this means that an entire generation is now saddled with unsustainable debt in exchange for an attempt at least at a college degree. The burden is so heavy that even if you graduate you may not have access to the middle-class life that the college degree once provided."

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Will I have to re-apply now that the form officially launched?

No. The Education Department says that applications submitted during the testing period will be processed. There is no need to apply a second time later.

What's the advantage if I applied during beta?

Applications submitted during the beta period will be processed now that the official form has launched, said higher education expert Mark Kantrowitz. Those who applied during the beta, he said, "will be first in line."

There are two main reasons it makes sense to act swiftly here.

A number of Republican legal challenges have been brought against the Biden administration's student loan forgiveness plan, risking to put the policy in jeopardy.

But, Kantrowitz said, "any borrower who has already received forgiveness will likely get to keep it, even if the courts block the President's plan."

He went on: "The courts tend to not claw back benefits that have already been received."

The Education Department also says that after a borrower applies for forgiveness, they will get the relief within six weeks.

Applying now means that when student loan payments restart in January, after the pandemic-era pause on the bills expire, you won't have to make payments if your debt is fully erased or larger payments than necessary if you're left with a smaller balance.

What information does the application require?

In addition to your full name and date of birth, you'll also have to provide your Social Security number.

If you don't have those nine digits memorized, consult the Social Security card you were issued; it has with your number on it. If you've lost your card, you can get a replacement at the Social Security Administration's website.

Any borrower who has already received forgiveness will likely get to keep it, even if the courts block the President's plan.

Mark Kantrowitz

higher education expert

You don't need your Federal Student Aid ID, also called an FSA ID, to apply for forgiveness, and proof of income won't be required unless the Education Department follows up with an additional request.

The department will verify a certain number of borrowers have told the truth about their eligibility as a fraud prevention measure, although more than 90% of federal student loan borrowers fall bellow the income caps for the relief: $125,000 for individuals and $250,000 for families.

How will the Education Department know if I received a Pell Grant?

The application for forgiveness doesn't ask whether you received a Pell Grant or not. There's no reason to worry, though, Kantrowitz said. The Education Department has that information already.

What happens after I apply?

After a borrower applies for forgiveness, they'll receive an email confirmation from the Education Department, Kantrowitz said.

The department will then review the application to confirm eligibility, he said. Some borrowers may receive a request from the department for additional information, including proof of income.

When your request for relief is approved, you'll receive an email saying so from the department. You'll then hear from your loan servicer when the forgiveness has been applied to your account.

Make sure your servicer, as well as the Education Department, has the most recent contact information for you. You can do so at StudentAid.gov.

Have more questions?

The Education Department has a toll-free hotline for borrowers who have questions about the application: 833-932-3439.

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