Student loan forgiveness has been a hot topic these past few weeks, and for good reason. President Biden just announced that he would be passing the Student Debt Relief Plan. Not only does this plan forgive up to $20,000 of federal student loans for certain borrowers, it also extended the repayment pause on federal loans until the end of the year. The plan is also creating a new income-driven repayment plan for student loan borrowers. What does the plan mean and should you apply?
What does the student debt relief plan mean for borrowers?
If you (or a loved one) has been tirelessly throwing money at student loans for years, Biden’s Student Debt Relief Plan may be a breath of fresh air. But before you get too excited, you should know the plan isn’t a blanket of forgiveness covering student loans everywhere.
To receive student loan forgiveness, these things must be true:
- You have federal student loans.
- Your annual income is less than $125,000 or you have a household income of less than $250,000
If you have a Pell Grant through the Department of Education, (and you meet the above requirements) you should expect forgiveness for $20,000 of your total loan. If you don’t have a Pell Grant, you should expect $10,000 in student loan forgiveness.
Which loans are eligible for debt forgiveness?
Like we said earlier, only federal loans are eligible to receive forgiveness through the Student Debt Relief Plan. But ‘federal plans’ isn’t just a one-size-fit-all-category. Federal loans are direct loans through the William D. Ford Federal Direct Loan program. Those loans include subsidized, unsubsidized, Graduate PLUS, Parent PLUS, and some consolidated loans. You may also be eligible if you have:
- Federal Family Education Loans (FEEL)
- Federal Perkins Loan Program loans
- Defaulted Federal Loans
For more specifics on eligible loans, visit StudentAid.gov. You can also find more information on student loan forgiveness programs like Public Service Loan Forgiveness (PSLF).
How to apply for student loan forgiveness
If you meet the above requirements, you can apply for student loan forgiveness starting in early October through December 31, 2023 on StudentAid.gov. Once you apply and are approved, you should receive forgiveness within about two months.
To apply, log in or create an account at StudentAid.gov
What you should know about debt forgiveness
The Biden Administration’s decision to forgive up to $20,000 of student loan debt comes as a breath of fresh air to so many borrowers-some who have been buried under the weight of intense debt. But not everyone’s story is the same. Some borrowers may have been sitting on their payments in the hope that President Biden would sweep away some of their debt. Whether you apply for student loan forgiveness or not, we would encourage you to make your own plan…one that doesn’t have you waiting on the White House for relief. A solid financial plan is the right next step-and we can help.
Speak with a SageSpring advisor today to create a solid plan for your future.