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Congressional Budget Office: cost of federal loans will increase by $400 billion post debt relief

BOSTON — The Congressional Budget Office estimates that the cost of outstanding student loans to the federal government will increase by approximately $400 billion due to the executive action cancelling a portion of the outstanding debt.

The action canceled up to $10,000 of debt issued on or before June 30, 2022, for borrowers with income below specified limits and an additional $10,000 for such borrowers who also received at least one Pell grant.

Last week the federal government announced roughly 813,000 Massachusetts residents are eligible for student loan debt relief. Now, we’re getting some details about the process to apply for it as well as some warnings about scams to be aware of and offers that could set you back.

If you think you qualify for federal student loan debt relief, you must apply to get it. There is nothing coming in the mail. The U.S Department of Education says start here at studentaid.gov/debtrelief and sign up for alerts.

“They can sign up for notifications that will let them know when the application portal becomes available,” said Deputy Under Secretary of the Department of Education, Jordan Matsudaira. “That application portal is going to go live in October. And once it goes live, borrowers can just go to that application portal to fill out a simple attestation form. The borrowers will be eligible if they make under $125,000 or if they’re married, if their joint income. It’s under $250,000.”

If approved, the feds are estimating it will take 4-6 weeks to process the cancellations. They suggest you apply by November 15th, 2022 or 4-6 weeks before the pause on federal student loan payments is over.

The official federal applications are not live yet. But people are getting bombarded with text messages and emails encouraging people to check their eligibility through third-party vendors.

“The things that I want your viewers to be aware of is that they should never have to pay to receive this benefit,” said Matsudaira.

“Do not take the bait,” says Representative Ayanna Pressley, (D) MA-7.

Massachusetts Representative Ayanna Pressley, who’s been advocating for this program for years, taking her warning one step further. She says even offers from legitimate lenders to refinance current student loans could cost you.

“You will be ineligible for the debt relief. So, we want to make sure everyone who is eligible for this debt relief is accessing it.” Pressley warns a federal student loan refinanced with a private lender is then a private loan, thus ineligible.

Republicans are discussing legal challenges to this entire program. But the Department of Education is moving forward saying they are confident they’re on firm legal ground.

The program runs through December 2023.

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