There are thousands of college loan recipients who may be able to cancel their loans. While the qualifications can get complicated, if you qualify, you have until April 30 (2024) to make the “adjustment.”
“More than 3.6 million William D. Ford Federal Direct Loan (Direct Loan) Program borrowers will receive at least three years of credit toward loan forgiveness, and many will see their loans forgiven automatically,” reports the U.S. Department of Education.
According to the Consumer Financial Protection Bureau, there are some catches in this new offer. “ To get the most credit toward loan cancellation, borrowers with the types of federally managed loans listed below must consolidate them: Commercially held Federal Family Education Loan (FFEL); Parent PLUS loans; Perkins loans and Health Education Assistance Loan (HEAL) Program loans.
“After you take this step, your new Debt Consolidation Loan is eligible for the one-time adjustment and more of the payments you have made up to this point will be counted toward loan cancellation.”
Who qualifies for this loan forgiveness?
- Those borrowers on an income-driven repayment (IDR) plan or were on one in the past;
- Borrowers in the Public Service Loan Forgiveness (PSLF) program; or
- Those not on an IDR plan but are interested and have Direct or Federal Family Education Loan (FFEL) Program loans held by the U.S. Department of Education (ED).
If you submit an “adjustment” application, does that automatically cancel a loan? Maybe not. The Dept. of Education has to process some paperwork, which takes time.
“Please note that submitting a consolidation application alone does not guarantee any benefits under the payment count adjustment,” the Department states.
“In general, it takes at least 60 days to process a Direct Consolidation Loan application and to disburse the new loan. This means that if you want to consolidate your loan(s) in order to get the benefit of the adjustment, you should submit a loan consolidation application by April 30, 2024.”
What if you don’t qualify for an adjustment? You still may be able to lower your monthly payments, but need to convert to an Income-Driven Repayment Plan. Click here to find out if you’re eligible.
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