Thousands of college loan recipients may have the opportunity to cancel their loans, but the qualifications can be complicated. The U.S. Department of Education reports that more than 3.6 million William D. Ford Federal Direct Loan Program borrowers may be eligible for at least three years of credit toward loan forgiveness, with many seeing their loans forgiven automatically. However, there are some catches to this new offer, as borrowers with certain types of federally managed loans must consolidate them to receive the most credit toward loan cancellation.
To qualify for loan forgiveness, borrowers must meet certain criteria, such as being on an income-driven repayment plan or having been on one in the past, being in the Public Service Loan Forgiveness program, or not being on an IDR plan but having Direct or Federal Family Education Loan Program loans held by the U.S. Department of Education. It is important to note that submitting an “adjustment” application does not automatically cancel a loan, as the Department of Education must process the paperwork, which takes time.
The Department of Education states that it generally takes at least 60 days to process a Direct Consolidation Loan application and disburse the new loan. Therefore, borrowers who wish to consolidate their loans in order to receive the benefit of the adjustment should submit a loan consolidation application by April 30, 2024. If a borrower does not qualify for an adjustment, they may still be able to lower their monthly payments by converting to an Income-Driven Repayment Plan.
Overall, this new opportunity for loan forgiveness could be a significant help for many borrowers struggling with student loan debt. However, it is essential for borrowers to carefully review the qualifications and requirements to ensure they meet the criteria for loan cancellation. By taking the necessary steps before the deadline, borrowers may be able to take advantage of this program and potentially have a portion of their loans forgiven.
