New details on plans to forgive millions in student loan debt owed by Vermonters
MONTPELIER, Vt. (WCAX) - We are learning new details about plans to forgive millions in student loan debt owed by Vermont borrowers.
Since the Biden administration announced $10,000 and $20,000 in student loan relief, we’ve learned who is eligible, who has to do some paperwork to become eligible and who will not get any relief at all.
The federal loan relief applications are slated to come out in early or mid-October. People with private loans are ineligible. Only government loans are eligible but some may take an extra step to get there.
“What is happening is they’re uncovering exceptions to this as they go along but they have offered public assurances that they’ll find a way to make sure those loans are eligible,” said Scott Giles of the Vermont Student Assistance Corporation.
Until 2010, VSAC offered Federal Family Education Loans or FFEL. More than 11,000 Vermonters took one out.
VSAC is in talks with the feds to have those loans automatically erased. But as of now, those loans will not automatically be forgiven. So FFEL borrowers need to go to studentaid.gov and consolidate them into a direct federal loan, then they will qualify for relief.
“When you do that you make it a direct loan, meaning directly from the Department of Ed. That should qualify,” said Joshua Cohen of Cohen Consumer Law.
Married couples who consolidated into something called spousal loans are also not eligible.
Meanwhile, under a separate program, up to 30% of Vermont borrowers could have their loans completely wiped out, no matter how large. If you work in federal, state or local government, or at a nonprofit, you could be eligible for Public Service Loan forgiveness.
A waiver making it easier for Vermonters to apply expires at the end of October.
“There are no limits on that cancellation, so if you are eligible for it, all of your remaining debt could be canceled,” Giles said.
The constellation of loan relief programs in motion in the coming months will knock off billions in borrower debt, but experts acknowledge it will do nothing for future borrowers.
“Yes, we need to fix it. It’s a good start for those of us in the pool but we need to build a different pool that doesn’t create the same problem again,” Cohen said.
Ultimately, there will be more guidance coming from the federal government including where people can apply.
As for other types of federal loans, like Stafford and Perkins loans, only loans under the direct loan program are eligible for automatic relief. But again, Perkins and Stafford loans under the FFEL program are eligible, you just have to take that extra step of consolidating first.
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