Act Now: Deadline approaching to consolidate student debt to qualify for federal forgiveness programs

Time is nearly up to consolidate your student debt to take advantage of various federal debt forgiveness programs. The Department of Education has reminded borrowers that they have until Tuesday, 30 April, to consolidate, with “many” qualifying for “full student loan cancellation or more credit towards cancellation.” The “one-time adjustment” will be made this summer. Let’s walk through the eligibility requirements to take advantage of these programs.

Which types of borrowers are eligible?

To qualify, one must have a commercially held Federal Family Education Loan (FFEL), Parent PLUS loan, Perkins loan, or a Health Education Assistance Loan (HEAL) Program loan. The FFEL was one of the most common types of student loans until it was discontinued in 2010. It worked by connecting students with “private lenders to provide education loans guaranteed by the federal government” and was replaced by the William D. Ford Federal Direct Loan Program. The application can be submitted through the DoE’s website.

Three possible outcomes of consolidating your debt and the readjustment slated to occur this summer. The first is that the DoE will determine that some borrowers “still have more time left until the end of [their] repayment period.” While this group will not experience loan forgiveness, they “will be closer to the end of [their repayment period and closer to forgiveness.” The second group is those who, over the last decade or more, made sufficient payments on their loans to qualify for forgiveness, which will be applied automatically to the remaining balance of one’s loans. The third group is those who have overpaid on their loans and will receive. More on refunds can be learned directly on the DoE’s website.

The Parent PLUS Loan and the benefits of consolidating

Those with a Parent PLUS loan that have made at least twenty-five years’ worth of payments, covering 300 months, “will be automatically canceled through this one-time adjustment” that will take place this summer. While those with new loans might not be eligible for cancellation, the DoE has advised borrowers with this loan to “consolidate [...] before the April 30th deadline to maximize the benefit.”