Help is on the way for a significant number of Americans with student debt. The initial application is now open for the Biden administration's federal student loan forgiveness program. Pending the outcome of several lawsuits, borrowers can qualify to have up to $10,000 forgiven if their loan is held by the Department of Education, and they make less than $125,000 individually or $250,000 for a family.
For those who received Pell grants, up to $20,000 can be forgiven — and for many Black Americans, this is big news, as nearly 57% percent of Black students receive Pell grants each year.
Maureen Amos, executive director of financial aid, scholarships and student employment at Northeastern Illinois University, says the program can make a significant dent in loan debt for the students they serve.
“At my institution, our average student loan indebtedness is under $10,000,” Amos said. “If you look at the current research for Black students, Black students tend to borrow between $40,000 and $60,000 — so even $20,000 as a loan cancellation or forgiveness is very beneficial.”
City Colleges of Chicago Associate Vice Chancellor of Financial Aid and Scholarships Richard Hayes said the simple application is meant to encourage as many people as possible to apply.
“It literally takes about a minute to do the application … they just need to know their Social Security number, their name, date of birth and they fill that out and the Department of Education will reach back out if they need additional information,” Hayes said. “We hear the stories all the time about students having trouble with the FAFSA application. So they thought about that in mind is that hey, we want to make sure that this will reach students, we want to make sure it's easy and then we can do the hard work on the back end.”
Hayes says that while this program does not offer forgiveness options for private student loans, he urges borrowers with private debt to talk to their loan servicers and be up front and honest about their financial situations.
“It’s about getting with your financial aid professional, setting up a payment plan, they have a lot of payment plans based on income, so if a student is not making as much as they thought they would when they came out of college, they can use that as an avenue to a pay a lesser payment if they have private student loans,” Hayes said. “The worst possible thing you can do is not say anything. Not talk to them, not call them, or avoid them, that’s how students end up in default.”
Hayes also encourages students to look at in-state and community college options first to avoid overborrowing.
The deadline for applying to the Public Service Loan Program, which forgives loans of people who work for nonprofit organizations, has been extended to Oct. 31. Amos said the application process can be tedious, but for those who qualify, it can be well worth the effort.
“They can go through their servicer and apply to have loan forgiveness as well as if they are working for a not for profit organization … and then you need your employer to support the fact that you work for a not-for-profit organization,” Amos said. “It's a waiting game once the application is submitted so that you can hear back from your servicer. I've heard some good news though from some of our borrowers that they do get the response within the time period that they've been told.”