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Apply for Biden’s One-Time Forgiveness Right Away

Borrowers have over a year to submit their application, but waiting would be a huge and potentially expensive mistake.

Written By: Michael P. Lux, Esq.

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The time to apply for President Biden’s one-time student loan forgiveness is upon us, and the application is officially live.

Most borrowers will qualify for $10,000 of forgiveness. Those that received a Pell grant during college are eligible for $20,000.

The deadline to apply for the student loan relief is December 31, 2023. However, applying as soon as possible is the best practice.

Applying Right Away Could Help if Biden Loses a Lawsuit

Multiple lawsuits to cancel forgiveness are currently pending.

At this point, the Department of Education appears likely to succeed in moving forward with the one-time forgiveness. However, in litigation, there is no such thing as a sure thing.

What does this have to do with applying early?

Suppose you apply for $20,000 of forgiveness in October. By November, the debt is erased from your balance. In December, a judge strikes down the forgiveness program.

Preventing future forgiveness is much easier than reinstating loan balances for borrowers who have already received forgiveness. It is possible that if Biden strikes out in court, the early applicants will be the only ones who actually receive the forgiveness.

Sherpa Thought: We have seen something similar happen with commercially-held FFEL loans. Initially, this debt was considered eligible for the forgiveness program. However, the Department of Education changed the rules in response to the lawsuits filed.

The change of rules was a devastating blow to FFEL borrowers, but those that applied early to consolidate were able to beat the announced deadline.

Forgiveness Before the Restart is Ideal

The federal student loan payment and interest pause ends on December 31, 2022.

Once the pause ends, the daily accumulation of interest begins. Because of this change, the sooner you receive the one-time forgiveness, the more valuable it becomes.

To see the value in applying early, let’s compare two borrowers who receive $10,000 in forgiveness. Andy applies immediately, and his balance is erased by December 31, 2022. Bob waits until the very last second, and his balance isn’t erased until December 31, 2023. If Andy and Bob have identical 6% interest rates, Andy saves $600 by applying early!

Apply early, and get the $10,000 or $20,000 of debt erased before you start getting charged interest!

Don’t Assume Automatic Forgiveness Works

When Biden initially unveiled the new forgiveness program, one of the features was that millions of borrowers would automatically have their debt forgiven.

Many of the initial beneficiaries of the automated discharge will be those who recently completed a FAFSA application. However, the group may grow to include other borrowers.

While automation is a great feature designed to increase the number of borrowers who benefit, it should not be relied upon.

$10,000 of debt forgiveness is too important to leave to a computer algorithm. If you qualify, take every step possible to ensure that you benefit.

Completing the Form will be Extremely Easy

Completing the application will be easier than reading this entire article.

Borrowers won’t even need their FSA ID to process the application. Forgiveness applicants will fill out a form that asks for their name, social security number, date of birth, email address, and phone number. Then the borrower has to self-certify that they meet the income requirements. 95% of borrowers won’t need any tax documents or records to prove their income.

Completing the form takes less than 5 minutes.

Five minutes of work for $10,000 of forgiveness is a pretty good investment.

Click here to complete the one-page application.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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