Student Debt Relief Plan Made Simple
Written by: Samantha Masey - Associate Wealth Advisor
Article published in The Saratogian
As expected, on Wednesday, August 24, 2022, President Joe Biden moved forward with his promise of partial student loan forgiveness. The Biden administration provided a three-part plan that includes $10,000-$20,000 of student loan forgiveness for low to middle income borrowers. In recent years, the cost of higher education has continued to grow at a rate that has outpaced inflation causing stress on student loan borrowers. This article will explain what the student loan relief plan means for you, who qualifies for debt forgiveness, and how you can collect your benefit.
Student Debt Relief Plan Explained
The Student Debt Relief Plan is a three-part plan that includes a final extension of student loan repayments, relief for low to middle income families, and an income-driven loan repayment system for current and future borrowers. The final extension of student loan repayments has paused payments until December 31, 2022. The pause will occur automatically for borrowers.
The new rule for the income-driven repayment plan includes the requirement that borrowers will pay no more than 5% of their discretionary income monthly on undergraduate loans. It also raises the amount of income considered non-discretionary income which protects those funds from repayment. Borrowers earning under 225% of the federal poverty level or approximately a $15 minimum wage will not have to make a monthly payment. Additionally, the U.S. Department of Education will forgive loan balances after 10 years of payments (reduced from 20 years) and cover unpaid monthly interest if borrowers are below the 225% federal poverty level and thus not making monthly payments.
Who Qualifies for Debt Forgiveness?
The U.S. Department of Education will provide up to $10,000 of debt cancellation to non-Pell Grant recipients and up to $20,000 of debt cancellation to Pell Grant recipients with loans held by the Department of Education. Those that qualify fall under the low to middle income brackets specified by the plan. Specifically, single borrowers must fall under $125,000 of income or $250,000 if married filing jointly.
How Can I Collect the Benefit?
To be eligible for loan forgiveness, the U.S. Department of Education needs each individual borrower’s income information. For many people, this information is already available to the relevant parties, and you will receive your relief automatically. However, if you need to provide this information, the U.S Department of Education is providing an application form in the coming weeks. If you would like to be notified once the application is available, you can sign up on their subscription page here. When the application becomes available, prepare the application with the necessary information and follow the steps needed to potentially become eligible for student loan debt relief.
If you have questions and would like to continue this conversation, please reach out to the team at Bouchey Financial Group.
Additional Resource:
StudentAid.gov - The Biden-Harris Administration's Student Debt Relief Plan Explained
Bouchey Financial Group has local offices in Saratoga Springs and Historic Downtown Troy, NY.