New details on plans to forgive millions of student loan debt owed by Vermonters
MONTPELIER, Vt. (WCAX) – We are learning new details about plans to write off millions in student loan debt owed by borrowers in Vermont.
Since the Biden administration announced $10,000 and $20,000 in student loan relief, we’ve learned who is eligible, who needs to complete paperwork to become eligible, and who won’t get any relief.
Applications for federal loan relief are expected to go out in early to mid-October. People with private loans are not eligible. Only government loans are eligible but some may go the extra mile to make it happen.
“What’s happening is they’re finding exceptions to this as they go along, but they’ve offered public assurances that they’ll find a way to make sure these loans are eligible,” Scott said. Giles from the Vermont Student Assistance Corporation.
Until 2010, VSAC offered Federal Family Education Loans or FFEL. More than 11,000 Vermonters pulled one out.
VSAC is in talks with the federal government to have these loans automatically forgiven. But from now on, these loans will not be automatically canceled. FFEL borrowers must therefore go to studentaid.gov and consolidate them into a direct federal loan, then they will be eligible for relief.
“When you do that, you make it a direct loan, that is, directly from the Ministry of Education. It should qualify,” said Joshua Cohen of Cohen Consumer Law.
Married couples who have joined together in so-called spousal loans are also not eligible.
Meanwhile, under a separate program, up to 30% of Vermont borrowers could see their loans completely wiped out, regardless of size. If you work in federal, state, or local government, or in a nonprofit organization, you may be eligible for a public service loan forgiveness.
A derogation facilitating the application of Vermonters expires at the end of October.
“There’s no limit to this forgiveness, so if you qualify, all of your remaining debt could be forgiven,” Giles said.
The constellation of loan relief programs underway in the coming months will knock billions out of borrower debt, but experts agree it will do nothing for future borrowers.
“Yes, we have 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 with other types of federal loans, such as Stafford and Perkins loans, only loans under the Direct Lending Program are eligible for automatic relief. But again, Perkins and Stafford loans under the FFEL program are eligible, you just need to take that extra step of consolidation first.
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