Which student loans are eligible for forgiveness? Here’s what Illinois borrowers need to know
President Biden’s student loan forgiveness application officially went live Oct. 17, and the federal cancellation plan could wipe out debt for 31% of Illinois borrowers, provided they meet income limits .
The plan forgives up to $10,000 in federal student loans to borrowers who have not received Pell grants and up to $20,000 in forgiveness to those who have received at least one Pell grant during their college career.
Borrowers are eligible if their adjusted gross income in 2020 or 2021 was less than $125,000 as an individual or $250,000 as a married couple.
According to Lynne Baker, spokeswoman for the Illinois Student Aid Commission, more than 70% of direct federal borrowers could have more than 25% of their debt forgiven, as long as they meet federal income criteria.
About 31% of federal student borrowers in Illinois owe $10,000 or less, and about 42% of federal borrowers in the state have between $10,000 and $40,000 in debt, according to data from the U.S. Department of Education. Education.
What types of student loans are eligible for forgiveness?
A variety of federal student loans disbursed before June 30, 2022 are eligible for forgiveness, Baker said, including the following:
Direct loans (unsubsidized and subsidized)
Direct Consolidation Loans (all underlying loans must be Ministry of Education held loans and must be disbursed by June 30, 2022)
FFELP loans held by National Education or in default with a guarantee organization
Perkins loans held by the Department of Education
PLUS loans for parents and graduates
Delinquent loans (includes subsidized Stafford loans held by the Department of Education or commercially serviced, unsubsidized Stafford loans, parent PLUS, graduate PLUS and Perkins loans held by the Department of Education)
Additionally, consolidation loans that include all FFEL and Perkins loans not held by the Department of Education are also eligible if the borrower applied for consolidation before September 29, 2022, Baker continued.
Loans not eligible for relief include FFELP loans held by businesses (which are not in default), private loans (including any federal loan that has been consolidated into a private consolidation loan), and any loan disbursed to effective July 1, 2022, according to Baker.
Avoid forgiveness scams
Although the official application for student loan forgiveness under President Biden’s plan is brief and asks for your Social Security number, it’s important to make sure you’re completing the correct application to avoid any fraudulent programs.
The Federal Office of Student Aid offers these tips for avoiding scams:
Be aware of common scams. These can include terms such as “act immediately”, “registrations are first come, first served”, and “Your student loan is flagged for discount pending verification.” Call now!”
don’t pay for help with loan relief. The FSA office says “Getting help from an unaffiliated private debt relief company does not necessarily mean you will be scammed”, but the federal government’s unique forgiveness application is free from to fill.
Confirm that you are working with a Partner of the United States Department of Education. The FSA office offers an online list of official partners.