Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.
Now that millions of federal student borrowers have received the long-awaited news that some of their debt will be forgiven, they have entered a new phase: waiting to see it reflected in their loan balance.
Last week, President Joe Biden announced plans to forgive up to $10,000 in federal student debt per borrower and up to $20,000 for Pell Grant recipients. Individuals earning less than $125,000 per year and married couples or heads of households earning less than $250,000 per year are eligible for debt cancellation.
And while it may seem like a long process to watch with lenders, Meagan Landress, certified student loan professional and consultant at student loan plannertells Select that borrowers can expect the discount to reflect in their accounts before the end of the year.
Higher education specialist Marc Kantrowitz agrees, adding that it will likely take a month or two for the US Department of Education and student loan servicers to implement loan forgiveness.
Below is everything we know from the information provided to the public so far about when borrowers can expect the relief.
Subscribe to the Select newsletter!
Our top picks delivered to your inbox. Shopping recommendations that help you improve your life, delivered weekly. register here.
In order to receive a rebate, most federal student loan borrowers with qualifying income will need to submit an application form detailing their income.
According to Kantrowitz, this can add time to the process, and we don’t yet know how complex the form is — it is said to be available early October. If loan forgiveness ends up being challenged in court, that could also mean a delay.
The Federal Student Aid website says, however, that relief can be expected within four to six weeks of completing the claim; the site also advises applying before November 15, 2022, in order to see your loans canceled by the end of this year.
Some qualified borrowers, however, may see their forgiveness sooner. Those with income-based repayment plans should automatically receive their student loan forgiveness since the Department of Education already has their income data, Kantrowitz says. The Ministry of Education estimates that 8 million borrowers will automatically receive relief since their income information is already on file.
In the meantime, federal borrowers can register through the Ministry of Education subscription page be notified when the pardon process officially opens and the application form is posted online. The deadline for applying, which is noted on Federal Student Aid websiteis December 31, 2023.
If you still repaid your loans after the payment pause was implemented on March 13, 2020, you may be eligible for a refund. There are already reports of borrowers calling their lenders, requesting repayment and receiving payments within days. While this action will bring back a borrower’s student loan balance, the borrower will likely see their balance canceled after requesting forgiveness.
If you qualify for the rebate but still have student debt
Many borrowers are probably wondering what to do with their loan repayment plan if they still have student loan debt after the forgiveness has been applied to their balance.
First, Landress and Kantrowitz recommend taking advantage of the continued suspension of payments and interest on federal student loans. As part of the plan announced by President Biden, he planned to extend the federal Covid-induced student loan repayment moratorium again, this time until December 2022.
Borrowers who do not need to reallocate these funds to increase their savings or pay off higher interest rate debt (such as credit cards) can take advantage of it by paying off their student loan anyway until the end of the year. Not only does this get student borrowers back to the habit of paying off their debt monthly, but with pending interest, it means their money goes straight to principal.
In 2023, when federal student loan payments and interest are expected to resume (and after borrowers have ideally received their forgiveness), those paying high interest may want to sign up for autopay to see what it does. “Not only are they less likely to be late with a payment, but they’ll get a 0.25 percentage point interest rate reduction as an incentive,” Kantrowitz said.
Another option when faced with a high interest rate is to consider refinancing depending on what the market is offering. This allows borrowers to consolidate all their loan payments into one, ideally with a lower interest rate, and choose a new loan term.
Keep in mind, however, that refinancing federal loans with a private lender deprives borrowers of any federal loan protections, such as income-based repayment plans, future student loan forgiveness and deferral options. or forbearance – which is why borrowers must wait to receive Biden’s loan forgiveness first. Although the Ministry of Education continue to process rebate requests after the payment break expires at the end of this yearwe recommend that you send your request as soon as it is available so that you can obtain your pardon as soon as possible.
If you choose refinancing
When shopping, borrowers should check out some of Select’s top student loan refinance lenders. One of the best, SoFi, offers its own protections, which may be appropriate enough for someone to make the switch, including everything from unemployment protection to Covid forbearance and loan deferral. The lender will also honor any borrowers’ pre-existing grace period on the loans they are refinancing.
No origination fees to refinance
Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans
Types of loan
Variable rates (APR)
From 2.49% (rates include 0.25% autopay discount)
Fixed rates (APR)
From 3.99% (rates include 0.25% autopay discount)
From $5,000; more than $10,000 for residential medical/dental loans
Minimum credit score
Authorize a co-signer
And borrowers who want to refinance, whether it’s a federal student loan or a private student loan, can get a better chance of approval from lenders like Serious and Citizens Bank. The former allows those with fair credit scores to apply, while the latter allows applying with a co-signer.
Whichever repayment route you choose, know that there are products out there that can help ensure you’re always paying off your student debt (even when you don’t want to think about it). The student loan repayment app, Crusher, for example, uses your everyday spare change to systematically reduce your student loan debt. Read Select’s full Chipper review for more.
Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.