“I feel cheated”: after 20 years of paying off my student loan, I discovered that I was not entitled to forgiveness. My loans total $167,000. What can I do?

I took out loans for vocational/higher education during the years 1993 to 1996. I took out about $54,000 in loans. In 2002, I consolidated all my federal loans. The balance is approximately $167,000. I’ve been paying between $350 and $1,100 a month for 20 years.

I thought I was on an income driven repayment plan, but recently my loan manager was changed to Navient NAVI,
-2.03%
at Aidvantage, and I was able to see my loan information and see different payment plans under IDR. Turns out I’m not under any IDR.

I thought after 20-25 years of payments any loan balance would be forgiven. I am very disappointed that I was not part of one of these plans, and I feel cheated.

Now that the Biden administration is announcing student loan cancellations, I don’t know if I should apply for one of the IDR plans now — although it would seem unfair to start over, as I’ve been on regular repayment since 2002. Or should I wait and see if I qualify for an override via Biden?

Conflict

Dear Conflict,

It’s small consolation, but you’re one of at least 2 million people who thought they were on the right track to get loan forgiveness, only to realize their loans didn’t qualify. It’s a bitter pill to swallow. The student loan forgiveness program is a complex and error-prone bureaucratic process.

Income-contingent repayment (IDR) plans, for those unfamiliar with them, allow student loan borrowers to repay their debt as a percentage of their income, rather than a standard monthly payment tied to the size of the loan. and interest. rate.

Earlier this year, Navient pledged to forgive $1.7 billion in private student loans as part of a settlement with 39 attorneys general and student loan giant Navient. About 66,000 borrowers will have their private student loans forgiven.

Your loan amount has more than tripled in the past 25 years. This suggests an extended period of nonpayment, either due to postponement of economic hardship, postponement of unemployment and general forbearance, and/or your late payment and fees.

Your loan amount has more than tripled in the past 25 years. This suggests an extended period of non-payment.

This can hurt your chances of forgiveness. The Biden administration announced this week that it will count all loan payments made under an income-driven repayment plan toward the 20 or 25-year discount at the end of an income-driven repayment plan. on income, says a student loan expert and author. Marc Kantrowitz.

As he points out: “Debt of $167,000 at 7.2% (the average interest rate for loans made between 1993 and 1996) gives a monthly repayment of about $1,100 on a student loan from for a period of 30 years. The progressive repayment would have a lower payment initially, but it would be at least $1,000.

The Department for Education, as you’ve seen, said this week it would launch a new review of its student debt portfolio in a bid to correct past mistakes that have denied millions of borrowers credit. of student loan forgiveness.

This will lead to immediate debt cancellation for around 40,000 borrowers under the Civil Service Loan Cancellation Program and at least three years of additional credit for more than 3.6 million borrowers seeking an income-contingent reimbursement, the department said.

Navient has made the decision to stop servicing federal student loans under the Direct Lending Program. Your service portfolio has therefore moved to Aidvantage, which in turn is owned by Maximus Education LLC and runs a direct lending program.

The Direct Loan Program offers four IDR plans: ICR, IBR, PAYE, and REPAYE. “Because his loans were taken before October 1, 2007, he is not eligible for PAYE,” said Kantrowitz, the author of “How to Apply for More College Financial Aid.”

IBR or REPAYE will yield the lowest monthly loan payment, he adds, depending on whether you’re married and file separate or joint returns with your spouse, whether you have college loans, and whether your income exceeds your student loan debt.

You probably need an IDR plan. “Moving to an income-driven repayment plan versus a possible future loan forgiveness from President Biden is not a choice situation,” Kantrowitz says. “Also, President Biden asked for $10,000 in loan forgiveness, not full forgiveness.”

Your situation is clearly complicated and not a simple case of remission of student debt. I’m sorry it’s been hovering over you all these years. The Institute of Student Loan Advisors and the National Foundation for Credit Counseling are two nonprofit organizations that can offer you more practical help.

Yoyou can email The Moneyist for any financial and ethical questions related to the coronavirus at [email protected], and follow Quentin Fottrell on Twitter.

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