Student loans are tough for many post-graduates to deal with. However, these loans are necessary for students to be able to afford higher education. Even though these loans are necessary for some, they can mean racking up thousands upon thousands of dollars in debt. Because of this, it is important to know what’s going on with student loan cancellations. If you haven’t heard, President Biden announced that he will be canceling student loan debt for eligible borrowers.
President Joe Biden Will be Canceling Student Loan Debt for Eligible Borrowers
President Joe Biden made an announcement on August 24, 2022. In this announcement, he explained that he was going to be forgiving federal student loans for a majority of borrowers. This action stems from his campaign trail where he pledged he would provide relief financially to Americans across the country. Besides forgiving student loans, he is also extending the pause on federal student loan payments. Originally, the pause was supposed to end on August 31st, 2022. However, it received an extension to end on December 31st, 2022.
In addition to this, during his announcement, he also talked about new income-driven repayment plans. He said that the new plan would have a cap on monthly payments on undergraduate loans. This cap would look at the discretionary income of the borrower. The cap is worth 5% of the borrower’s discretionary income. This makes a difference because most existing plans have a rate of 10%.
How Much Will Be Forgiven?
Qualifying borrowers will be able to get a maximum of $20,000 forgiven. However, borrowers that don’t qualify for that amount will have $10,000 forgiven. It’s important to keep in mind this is not for all student loan borrowers. Instead, it is only for those that are eligible.
Who is Eligible for Student Loan Forgiveness?
It doesn’t matter whether a student is currently a student or no longer a student. The eligibility criteria will look at income level. There are guidelines that borrowers must fall within! To qualify for student loan forgiveness, a borrower must make no more than:
- $125,000 per year as a single filer
- $250,000 per year as a couple filing jointly or as a head of household
Those that meet these income guidelines will qualify for $10,000 in student debt relief. These income levels will be in reference to either the 2020 tax year or the 2021 tax year. Students that were claimed as dependents will have their eligibility be determined by their parent’s income instead of their own.
It’s also important to keep in mind those who meet this income level and also received a Pell Grant will qualify for $20,000 in student debt relief. This is a nice perk because a majority of student loan borrowers received this grant! Sadly, there are borrowers that won’t be able to qualify. This includes borrowers that have private student loans. Only those with federal student loans will be eligible for this relief.
How Do You Get This Forgiveness?
Students can visit studentaid.gov. From there, they can apply under the student loan debt relief section on the website. They will need to fill in some personal information like:
- Social Security Number
- Date of Birth
- Phone Number
- Email Address
When going through your application, you want to make sure you pay attention to the qualifications to confirm that you are able to benefit from this forgiveness. After you review, you will need to confirm that you meet the eligibility criteria.
Once you submit your application, you should expect the processing time to take between four weeks and six week. The ED will use records on file to confirm that applicants are truly eligible. Some applicants may find that they need to provide documentation to verify their income. Keep in mind applications must be submitted no later than December 31st, 2023!
What Loans Qualify for Forgiveness?
The student loan relief will be available to borrowers that have at least one of the following:
- Undergraduate loans
- Graduate loans
- Parent Plus loans
How Many People Will Benefit?
According to the White House, it is estimated that 43 million student loan borrowers will benefit from this relief. On top of that, they expect up to 20 million borrowers to have their remaining student loan balance completely eliminated. To put these numbers in perspective, roughly 45 million residents in America have some form of student loan debt.
Is This the Same Cancellation That Canceled Billions in Student Loans?
If you are thinking about when President Biden canceled $25 billion in student loans, it is important to know that this forgiveness is completely different! President Biden canceled student loan debt entirely for qualifying borrowers. This includes:
- Borrowers that have a permanent and total disability
- Public service loan forgiveness
- Borrower defense to school closures and repayment of student loans
This opportunity for up to $20,000 cancellation of student loan debt is different because it looks to forgive student loans for qualifying federal student loan borrowers that are within the specified income limit.
What If I Need Help with My Student Loans and Don’t Qualify for Relief?
If you are having a hard time keeping up with your student loans but do not qualify for relief, you may feel hopeless. Luckily, that’s not the case. Instead, there are some support tips that may help improve your current situation. These tips include:
Consolidate Your Student Loans
If you have multiple student loans, that can mean multiple interest rates and multiple due dates. You may benefit from consolidating your student loans. When you consolidate your loans, you are basically taking two or more of your student loans and squishing them into one loan. The benefit here is you only have one payment due per month and one interest rate to account for.
Check Out The Teacher Loan Forgiveness Program
While you may not qualify for any of the relief that we talked about above, you may qualify for other assistance. This includes the Teacher Loan Forgiveness Program. This program can forgive a maximum of $17,500 on federal direct loans. However, this does not include PLUS loans! To benefit from this forgiveness, a borrower must have taught for five consecutive and complete years. They would need to have taught in an eligible low-income educational service agency or school. The timeframe that they must have taught within would include having at least one year done after the academic year of 1997 to 1998.
President Biden made an announcement on August 24th, 2022, regarding student loans:
- Canceling up to $20,000 on student debt for qualifying borrowers
- Extending the pause on federal loan payments
- A new income-driven repayment plan with a monthly payment cap of 5% of a borrower’s discretionary income
With this support, many student loan borrowers will feel a sense of relief. It is estimated that 43 million borrowers will benefit. To qualify for this student loan forgiveness, borrowers will need to submit an application to the ED. The ED will have applications available to the public within the coming months. Many borrowers will see any remaining student loan debt they have disappear!