Consumer Alert: Student loan forgiveness. Your questions answered

ROCHESTER, N.Y. — The president’s promise to forgive student loans is being met with compliments, criticism, and questions—lots of them.  You’ll remember last week the president announced forgiveness of $10,000 dollars in federal student loan debt and $20,000 for Pell grant recipients.

And you’ve sent me some great questions.  So I got answers from an expert in education law.  Her name is Leslie Silva, an Albany lawyer and partner at Tully Rinckey, PLLC.

DEANNA DEWBERRY: First let’s address the question I get most often which is ‘I am an undergraduate student right now.  I have not started paying off my student loans. Am I eligible?  What’s the answer to that?

LESLIE SILVA: We believe the answer is yes so long as the loan exists then you should qualify for forgiveness whether or not you’ve been in deferment or you are actively paying the loan.

Payment of most federal student loans are deferred or postponed until at least six months after graduation or you are not enrolled for at least half time.  Here’s another question a lot of viewers have emailed me.

DEANNA DEWBERRY: I’m in graduate school. I haven’t started paying yet. Are undergraduate loans eligible? Are my graduate loans eligible? Are they both eligible?  What’s the answer to that?

LESLIE SILVA: I believe they’re both eligible. And that’s based on some of the guidance we’re getting from the new repayment plan because the new repayment plan has an indication that you’re going to see a weighted repayment for undergrad and graduate loans if they are mixed together at this point.

She’s referring to new rules that mandates that your monthly payments for loans for your undergraduate degree be capped at 5 percent of your discretionary income, and graduate school loans be capped at 10 percent.  So after the government forgives $10,000, your repayments will be weighted to reflect whether you’re paying undergraduate or graduate school debt. Here’s the third question sent to me more frequently.

DEANNA DEWBERRY: I had to file for bankruptcy; my student loans were not discharged in the bankruptcy filing; I’m still paying for them.  Am I eligible?  What’s the answer to that?

LESLIE SILVA:  Not only are you eligible, you’re eligible even if you have not been paying on those loans. If your federal student loans are in default, then the new repayment plan is going to bring you current and it’s going to help you rehabilitate your credit by starting fresh and making new payments on that loan.

That means the record of your default will be removed from your credit report, and you’ll be able to start fresh with a new payment plan.  You can check your credit report for free.

If the default remains on your report, you need to reach out to your loan servicer to make sure it follows through.  For all borrowers, your income-based payments should be lower following the new rules. I brought you a story last week that explains how they’ll be calculated.