Many grads struggle to pay off their student loans. However, for students to afford higher education, these loans are important. Despite the fact that some people need these loans, taking them out could result in piling huge debt. As a result, the status of student loan cancellations is important to know. In case you were unaware, President Biden stated that he would forgive qualifying borrowers’ student loan debt.
The Student Loan Debt of Eligible Borrowers Will be Forgiven by President Joe Biden
On August 24, 2022, the announcement on student loan debt was made by President Joe Biden. He stated that he would be forgiving federal student loans for the great majority of borrowers in this declaration. This measure is a result of his campaign commitment to assist financially troubled Americans all around the nation. He is extending the pause on federal student loan payments in addition to canceling student loan debt. The pause was originally planned to finish on August 31, 2022. It was given an extension, though, and will now end on December 31, 2022.
Additionally, he discussed new income-driven repayment plans during his announcement. According to him, the monthly payments for undergraduate loans will be capped under the new plan. The cap is worth 5% of the borrower’s income available for discretion (often referred to as discretionary income). This matters because the rate on the most current programs is 10%.
What Amounts are Forgiven?
Borrowers who meet the requirements may have up to $20,000 in debt canceled. However, $10,000 will be canceled for borrowers who don’t qualify for that quantity. It’s important to be aware that not all borrowers of student loans qualify for this!
How Does Student Loan Forgiveness Work?
It makes no difference whether a person is studying or not right now. Their income level will be considered while determining eligibility. Borrowers are required to follow certain rules! In order to be eligible for this forgiveness opportunity, there are income limits in place for:
- Single filers which have an income limit of $125,000
- Married filers which have an income limit of $250,000
- Head of household filers which have an income limit of $250,000
These income requirements must be met to be eligible for the $10,000 in student loan debt relief. The 2020 or 2021 tax years will be used as the reference point for these income levels. The eligibility of students who were listed as dependents will be based on their parent’s income rather than their own.
Those who achieve this income limit and have obtained a Pell Grant are eligible for the full $20,000 in student loan relief instead of just $10,000. Given that the majority of recipients of student loans received this grant, this is a nice benefit! Unfortunately, some borrowers won’t be eligible. This includes borrowers of private student loans.
How Can You Get This Forgiveness?
Students will be able to find the application on studentaid.gov. Some information that applicants will need to provide when filling out the application includes:
- Contact information like email address and phone number
- Personal information like name, Social Security number, and date of birth
A part of the application is confirming that you meet eligibility criteria like income level. Some applicants may be required to provide additional documentation to verify that they qualify. Luckily, applicants have time to fill out these applications. In fact, the deadline is December 31st, 2023!
Which Debts are Eligible for Forgiveness?
Borrowers will be eligible for student loan relief if they have at least one of the following:
- Loans for undergraduates
- Graduate student loans
- Parent Plus loans
How Many People are Expected to Benefit?
The White House expects that 43 million people who have student loan debt will benefit from this relief. Additionally, they expect that the outstanding student loan balances for up to 20 million students will be fully forgiven. To put these figures in comparison, about 45 million Americans are in some sort of debt thanks to student loans.
Is This the Same Cancellation that Canceled Millions of Dollars’ Worth of Student Loans?
It’s important to point out that this forgiveness is quite different from the $25 billion in student loan cancellation that President Biden announced in the past! President Biden completely forgave qualifying borrowers’ student loan debt. This involved:
- Borrowers who are totally and permanently disabled
- Loan forgiveness for public service
- Defense of the borrower against school closures and loan repayment
This option to cancel up to $20,000 in student loan debt is different since it aims to cancel loans for eligible federal student loan borrowers who fall under the stated income limit.
What if I Don’t Qualify for Relief but Still Need Support With My Student Loans?
You could feel helpless if you are having trouble paying your student debts but are not eligible for relief. Fortunately, you don’t have to feel that way. Instead, there are certain support options that could make your present situation better. Among these options are:
- Student Loan Consolidation
- Explore the Teacher Loan Forgiveness Program
Student Loan Consolidation
There may be several interest rates and due dates if you have more than one student loan. Consolidating your student loans may be in your best interest. When you combine your student loans, you essentially take two or more of them and combine them into a single loan. The advantage of this situation is that you only have to worry about one monthly payment and interest rate.
Explore the Teacher Loan Forgiveness Program
Even if you might not be eligible for any of the above-mentioned forms of relief, you might be eligible for other forms of support. For example, the Teacher Loan Forgiveness Program. Federal direct loan forgiveness under this program is worth up to $17,500. However, PLUS loans are not included in this! The requirement for this forgiveness is that the borrower must have taught for five full, uninterrupted years. They would have to have worked as a teacher at a low-income educational service organization or institution. The period of time that they were required to have taught in would have included at least one year after the academic years of 1997–1998.
To Sum Up
On August 24, 2022, President Biden made the following statement regarding student loans:
- Up to $20,000 in student loan debt forgiveness for eligible borrowers
- Extension of the federal loan payment pause
- A brand-new, income-based repayment option with a monthly payment limit of 5% of the borrower’s discretionary income
Many people who are paying off college loans will feel relieved with this support. 43 million borrowers are expected to benefit. Borrowers must submit an application to the ED to be eligible for this student debt forgiveness. Within the next few months, the public will be able to access applications from the ED. Many borrowers will see any outstanding debt from their student loans evaporate!