Student Loan Borrowers Are Running Out of Time to Get Debt Canceled
US President of the United States Joe Biden delivers remarks on student debt and lowering costs for Americans at Madison College in Madison, Wisconsin, United States on April 8, 2024. Borrowers could qualify for student loan forgiveness if they consolidate their loans by Tuesday.
Federal student loan borrowers who do not apply for loan consolidation before the April 30 deadline could miss a chance to have their debt cleared.
Under the Biden administration, student loan borrowers can apply for a “loan consolidation,” which combines all their federal student loans into one. Borrowers who consolidate their student loans could see their debt canceled more quickly or, in some cases, even immediately.
“My administration is able to deliver relief to these borrowers—and millions more—because of fixes we made to broken student loan programs that were preventing borrowers from getting relief they were entitled to under the law,” Biden said in a January statement announcing debt relief for 74,000 borrowers. According to the White House, the Biden administration has approved student debt cancellations for more than 3.7 million Americans.
“This deadline is crucial for many who have struggled with long-term student debt or financial products like Parent Plus loans with higher interest rates because it gives them the opportunity to consolidate those loans into one,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. “That may not seem like a tremendous thing on paper, but it can make their path to student loan forgiveness quicker and the interest rate on the single loan potentially lower than what they’re paying now.”
Borrowers who successfully consolidate their loans may have an easier time receiving debt cancellation under an income-driven repayment plan. These plans adjust borrowers’ monthly payment amount based on their discretionary income. So they typically lead to reduced payments or even lower the amount owed to zero.
Through income-driven repayment plans, borrowers could also have their debts erased after 10, 20 or 25 years. And if borrowers consolidate their loans, later loans for different degrees may be included in their initial repayment plan, bringing their loan balance to zero years before it otherwise would have come down.
Every type of federal loan qualifies for consolidation, but borrowers must apply for the direct consolidation loan at StudentAid.gov or with their loan servicers. All applications must be submitted by April 30.
For many borrowers, their debt could be canceled in as little as 10 years if they sign up for the newest income-driven repayment plan, SAVE.
“For students who qualify for the consolidation, this should be an all-hands-on-deck moment,” Beene said. “You need to take all the necessary steps to make this a reality prior to April 30. Failure to do so could equate to additional years of student loans not being considered for the current forgiveness plans and thousands of extra dollars in interest owed.”
The Federal Student Aid office says borrowers can typically complete the application in 30 minutes or less. Those who require help during their application should call the Student Aid Information Center at 800-433-3243.
Overall, the White House said in April, income-driven repayment plans have accounted for more than $45 billion in canceled federal student loan debt.
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