(WSPA) – Earlier this fall, we heard so much talk about the Student Loan Debt Forgiveness program, but for weeks now, it has been on hold.
The program has faced numerous lawsuits, one of which is from six states including Iowa and Nebraska.
On Thursday evening, a federal judge struck down President Biden’s student loan forgiveness program, declaring it unlawful.
The Biden Administration appealed the ruling Friday. The case is headed to the US Court of Appeals for the Fifth Circuit.
That court of appeals could return the case to the lower courts or they could rule in favor of the Biden Administration.
It is possible either side could eventually ask the Supreme Court to pick up the case.
So, should you still apply? Do you really need help with the application? Scammers think so.
We looked into what you need to know about the process as it stands now, in this 7NEWS Consumer Exclusive, Loan Forgiveness Update.
26 Million have applied
When you have big dreams like Wofford sophomore Colby Garner, $10,000 in debt relief is no less than a shot in the arm.
“Coming out of my undergrad debt free would be huge for potentially applying to med schools and going through that process of becoming a doctor,” Garner said.
Garner is one of 26 million people, so far, who have already filled out the application for debt relief on StudentAid.gov.
The process takes about five minutes. You don’t even need to log in. You just fill out your name, social security number, date of birth and contact information.
“It also says in bold letters, if you don’t hear anything from us, everything should be fine, no further information is needed,” Carolyn Sparks, Wofford’s Director of Financial Aid, said.
Sparks said the process is far less complicated than actually applying for a loan, but there are important aspects borrowers need to keep in mind.
The final deadline to apply is December 31, 2023.
Still, you will need to apply by mid-November of 2022 if you want the debt forgiveness to kick in before the loan repayment pause ends on December 31, 2022.
Speaking of that, Sparks said college financial aid offices across the country are worried people who are not used to paying on their loans may quickly go into default.
“What I’m most afraid of and kind of what the buzz is right now, suddenly they’re going to be set with having to start repaying their student loans back… I’m worried about that.”
Another cause for concern is scams.
Jennifer Giesick in Spartanburg County said she has been overwhelmed with calls and emails from a company claiming to help her file, for a fee.
“It’s not until they get you wrapped into where you think oh, I can get some help finally some help, somebody understands, and then you need to pay us $320 a year,” Giesick said. “And I said for how many years? Well until it’s paid off. Well, how many years is that? well, 20-28 years, and I’m like, yeah, no.”
According to the Department of Education, “You never have to pay for help with your federal student aid.”
The department lists these three email addresses as the only legitimate ones sent from the agency to borrowers.
You can report scam attempts to the Federal Trade Commission by calling 1(877) 382-4357 or by visiting reportfraud.ftc.gov.
How are taxes affected?
The one-time student loan debt relief won’t be taxed at the federal level, but some states may choose to tax it at the state level.
What if you do not qualify?
Unfortunately for many borrowers, not everyone qualifies.
Private loans are out. Even hundreds of thousands of borrowers under the Federal Family Education Loan program no longer qualify.
“These are ultimately all Federally insured, so why should one qualify and not the other,” Amanda Griffeth, in Simpsonville, said.
Griffeth signed a petition asking the Federal Government to restore the FFELP program to the list of qualifying loans.
“It does seem unfair. It seems very much like a bait and switch,” Griffeth said.
So far 16 million of the 26 million applicants have already been approved, but whether their loans will be forgiven all depends on the outcome of those lawsuits, some of which have already been rejected by the U.S. Supreme Court.