President Biden recently announced a plan to help American student loan borrowers ease back into making regular student loan payments as the pandemic-related support is coming to an end. The most noteworthy part of the plan includes student loan forgiveness of up to $20,000. Wondering if you qualify? Let’s take a closer look at this plan and how it may affect you.
First of all, the Student Debt Relief Plan extended the student loan repayment pause for the final time. During the repayment pause, student loans are not accumulating any interest. The repayment pause extends through December 31, 2022, with payments resuming in January of 2023.
Second, and most importantly, the Student Debt Relief plan includes student loan forgiveness for qualifying borrowers. To be eligible for student loan forgiveness, your annual income must be below $125,000 for individuals or $250,000 for married couples or heads of households. If you received a Pell Grant in college and are under the income threshold, you will be eligible for up to $20,000 in debt cancellation. If you did not receive a Pell Grant but are under the income threshold, you will be eligible for up to $10,000 in debt cancellation. It is important to note that only federal student loans qualify for forgiveness. Private student loans do not qualify.
The amount of debt forgiveness you receive is also capped at the amount of your outstanding debt. For example, if you are eligible for $10,000 in debt relief, but have a balance of $8,000 remaining, you will only receive $8,000 in relief.
An application for student loan forgiveness should be available in early October 2022. According to the Department of Education, once a borrower completes the
application, they can expect debt relief within 4 – 6 weeks. Although you have until December 31, 2023 to apply for student loan forgiveness, the Department
of Education recommends applying before November 15, 2022 in order to receive relief before the payment pause expires on December 31, 2022.
Before you plan on what to do with a potential windfall, keep in mind that the president’s authority to implement the plan isn’t clear and there may well be lawsuits to stop it. Any lawsuits would likely be filed shortly so the plan viability may become clearer in the coming weeks.
Whether you qualify for student loan forgiveness or not, it is important to factor in your student loans when looking at your long-term financial plan. Contact us
with any questions regarding the Student Debt Relief Plan, or if you need help creating a plan for tackling student debt.