Recently, President Biden made a massive student loan debt relief announcement, revealing that he would cancel up to $20,000 in student loans for millions of Americans. In fact, nearly 20 million people would be eligible to have their debt completely canceled under the new plan, Mr. Biden said.
“Now a whole generation is burdened with overwhelming debt in exchange for trying to at least get a higher education. The burden is so heavy that even if you graduate, you may not have access to the middle-class life that a college degree once provided. ” Mr. Biden said as he laid out the plan, which would affect roughly 43 million federal student loan borrowers.
Mr. Biden also announced an additional extension of the federal student loan moratorium until December 31, 2022 (payments resume in January).
However, according to MeasureOne’s 2021 report, the loan forgiveness element does not apply to private student loan borrowers, who account for approximately 8% of total outstanding student loan debt in the US. If you fall into this category, then you may want to consider some other ways to save money, such as student loan refinancing. See what private lenders have to offer.
For federal student loan borrowers, here’s how to apply for debt relief.
Who is eligible for the Biden student loan forgiveness plan?
Before you even have to worry about applying for student loan forgiveness under the Biden administration’s new plan, you need make sure you are indeed eligible. Here are the criteria you must meet.
- You are a current holder of a federal student loan
- You earn less than $125,000 a year or your family earns less than $250,000 a year
- You are a Pell Grant recipient with loans from the Department of Education (required for additional grant)
If none of the above apply to you or you have a private student loan, check out what private lenders have to offer. Student loan refinancing, which essentially means swapping your existing loan for another with a potentially better interest rate, is a good option if you want to save money in the long run. Here’s how you can get started.
How to Apply for the Biden Student Loan Forgiveness Plan
If you check the boxes above, you likely qualify for student loan forgiveness under this new plan. Just note that your aid will be limited to the amount owed (so you won’t get to pocket extra money if you have less than $10,000 in federal student debt).
Now that you know you qualify, you’ll want to set a reminder to apply for a waiver. You can sign up for a notification from the Education Department when the application opens. The bid is likely to open in early October, White House officials said.
Eligible borrowers are encouraged to apply by November 15, 2022 “to receive relief before the end of the payment freeze on December 31, 2022.” But you’ll make it. The application deadline is December 31, 2023.
You will apply through the Department for Education, which will outline the exact steps you need to take. You’ll likely need to demonstrate that you meet the above income threshold and have federal student loan debt, so be sure to gather the relevant documents so they’re ready when the application becomes available.
“The application will be available no later than the end of the federal student loan repayment freeze at the end of the year,” the White House said in a statement, adding that 8 million borrowers could automatically qualify for aid based on their financial records. and the education department already has the income data.
“Thanks to the US bailout, this debt relief will not be treated as taxable income for federal income tax purposes,” the White House added.
Frequently asked questions about student loan forgiveness
After Mr. Biden announced student loan forgiveness, Google searches spiked — and Federal Student Aid received a huge amount of traffic, causing some delays on the site. So, here are some frequently asked questions related to the news.
What is a Pell Grant?
When researching the Biden administration’s student loan forgiveness plan, you’ll come across the term Pell Grant a lot. A Pell Grant is a form of financial aid that you may be eligible for based on your financial need as determined by the Department of Education when you file the Free Application for Federal Student Aid (FAFSA). application process.
Your expected income, student status, school-related expenses, and more are taken into consideration. In addition, your school must be registered with the program. Be sure to contact your school’s financial aid office if you would like more information.
This type of financial aid, which usually does not have to be repaid, is for undergraduate students “who demonstrate exceptional financial need and have not earned an undergraduate, graduate or professional degree,” according to Federal Student Aid.
The maximum Pell Grant award for the 2022-2023 academic year was just under $7,000, according to Federal Student Aid on its website.
“Since 1980, the total cost of both four-year public and four-year private colleges has nearly tripled, even adjusted for inflation. Federal support has not kept pace: Pell grants once covered nearly 80 percent of the cost of a four-degree public college degree for students from working families, but now cover only a third. This has left many students from low- and middle-income families with no choice but to borrow if they want to earn a degree,” the White House said in announcing its student loan forgiveness decision, noting that data from the Department Education shows that undergraduate students leave school with nearly $25,000 in debt on average.
Will the student loan repayment pause be extended again?
As mentioned, the “final” freeze on student loan payments has been extended until December 31, 2022.
“While the economy continues to improve, COVID cases remain elevated, and the president has made it clear that pandemic-related aid must be phased out so that people do not suffer unnecessary financial harm,” the Department of Education said in a statement. news release.
Are there other student loan forgiveness programs?
For those interested in student loan forgiveness, you can check out other programs available.
- Teacher loan forgiveness: Check the American Federation of Teachers website for a list of loan forgiveness and other financial aid opportunities. Generally, you must be a full-time teacher who has worked for five full years in some low-income school. You can also get extra credits with this limited-time waiver available through the end of October.
- Public Service Loan Forgiveness (PSLF): You may qualify for a PSLF loan if you are a full-time employee of a federal, state, local, or tribal government or non-profit organization that has direct loans, repay using a specific income-driven repayment plan, and have made 120 qualifying payments.
- Income Driven Repayment (IDR) Plans: The Department of Education is creating new rules that provide income-driven repayment plans that allow borrowers to set their loan payments based on what they can afford (based on non-discretionary income). After a certain time or number of payments, loans can be forgiven (more about the new rules).
- Military service: There are forgiveness opportunities for active military and veterans. Military.com lists a variety of financial aid and assistance opportunities.
- Volunteer work: Volunteer organizations like AmeriCorps and the Peace Corps can be apologetic.
Federal Student Aid lists more specific criteria and details you need to know to apply to each one.