Students and parents can get $500 in loan relief and up to $1,000 in cash to help them cover the cost of their first auto loan.
The new program, available through the federal loan modification program (MOM) and through the Consumer Financial Protection Bureau (CFPB), was announced Wednesday by the Consumer Finance Protection Bureau, the agency that administers the program.
“The Consumer Financial Protections Act is designed to ensure that consumers have access to affordable, quality, and affordable-to-use products and services that help them get on track with their education and careers,” CFPB Acting Director David Mak said in a statement.
The program will give $1 million in loans to borrowers who qualify for it and $500 to borrowers in the lowest income quartile, which means they earn less than $30,000 a year.
It also allows up to three additional loans to a borrower who has a household income of $30 to $70,000.
A consumer can apply for the loan at the Consumer Loan Services office at a participating Fannie Mae or Freddie Mac branch, a branch of a federally chartered savings bank, or through the Fannie, Freddie, and Ally branches.
It also has a separate program, the Financial Choice Program, to give low-income borrowers money to purchase goods and services.
Under the new program borrowers will be able to take advantage of the new loan forgiveness option if they have an outstanding balance of less than 10% of their annual income.
For borrowers in high-income quartiles, the program will be available if their annual gross income is at least $130,000, and for borrowers in low- and moderate-income quintiles, it will be offered if their income is less than the federal poverty line of $16,660.
For borrowers who have less than a 3.7% mortgage, the forgiveness program will only be available on an individual basis.
If a borrower applies for a loan and the FHA provides a loan modification, the FHFA will assess the borrower’s income for the year and grant the loan modification to the borrower, the CFPW said.
The CFPO said that borrowers in both high- and low- income quartiles would be eligible to apply for a $1.1 billion in loan forgiveness.
“For borrowers with a lower income, the federal government will be extending its existing program to make additional loan forgiveness available to low- to moderate- and high-earning borrowers,” the agency said.
It added that the government will also help borrowers who cannot afford a loan but are in need of financial assistance.
The FHA said the loan forgiveness program would help borrowers with moderate to low incomes “who have had difficulty meeting the debt-to-$130,100 threshold or who are unable to repay their loan without significant assistance from the FHLB.”
Borrowers who have been in a state or federal court for more than 90 days must first apply for loan forgiveness, and the lender must approve it before granting loan modification.
The loan forgiveness will last for a year and then be transferred to the lender.