About 700,000 people who have student loan debt in Colorado are expected to benefit from the Biden administration’s student debt cancellation program announced last month, according to the Colorado Attorney General’s Office.
Here’s some information about who is eligible and how to learn more about the process.
Who is eligible for debt cancellation under the new plan?
The loan cancellation applies to borrowers who have loans held by the U.S. Department of Education. Private student loans are not covered. People with an annual, individual income of $125,000 or less during the pandemic or married couples or heads of households making under $250,000 are eligible for up to $10,000 in loan cancelation.
If a borrower meets those income standards and received a Pell Grant in college — a federal grant awarded to students with exceptional financial need — they are eligible for up to $20,000 of relief.
How do you get loan forgiveness?
The U.S. Department of Education is launching an application that borrowers should fill out to receive their debt cancellation. The application is expected to open in early October. To receive a notification when the application is available, borrowers can sign up at ed.gov/subscriptions.
Borrowers are encouraged to fill out the application before Nov. 15 to receive their relief before payments on student loans resume at the start of 2023. The Biden administration extended the pandemic-related pause on student loan payments through the end of 2022.
Applicants can expect loan relief within four to six weeks.
What’s changing with the future of repayment?
The Biden administration is also proposing a new income-based repayment plan touted as substantially reducing monthly payments for lower- and middle-income borrowers.
The new proposal would:
- Ask borrowers to pay no more than 5% of their discretionary monthly income on undergraduate loans, down from 10%
- Ensure no borrower making less than 225% of the federal poverty level — about the annual equivalent of a $15 minimum wage — will have to make a monthly student loan payment
- Forgive loan balances after 10 years of payment, down from 20 years, for those with loan debts of $12,000 or less
- Cover the borrower’s unpaid monthly interest so no borrower’s loan balance will grow as long as they’re making their monthly payments
Anyone in Colorado with questions about their student loans is encouraged to contact the state’s student loan ombudsperson, who can walk them through their questions. Ombudsperson Kelsey Lesco can be reached at 720-508-6975 or [email protected]
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