If you’re in school and heard the news about President Biden’s plan to eliminate student debt, this article has more information for you. On August 24, 2022, Biden announced a plan to forgive up to $10,000 in federal student loans for millions of people. The President also extended the freeze on federal student loans, interest, and collections until the end of 2022.
Who Qualifies?
Students, families, and other borrowers with incomes of less than $125,000 for individuals or $250,000 for families can qualify for up to $10,000 in federal student loan forgiveness. An additional $10,000 in student debt relief will be available for people receiving Pell Grants. The amount of debt a borrower can receive is limited based on their debt. For example, a Pell Grant recipient who owes more than $19,000 will not receive $1,000 of the $20,000 in relief they qualify for.
Emergency Relief Extension
Biden’s administration has also announced an extension of the COVID-19 emergency relief for student loans to December 31, 2022. The loan freeze was created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
A New Repayment Plan
Let’s go over some of the main points in the new repayment plan that students and borrowers can look forward to:
- Students and borrowers don’t have to pay more than 5% of their monthly discretionary income on undergraduate loans, instead of the previous 10%.
- Increasing the total amount of income deemed non-discretionary, protecting it from repayment.
- Forgiving loan balances after 10 years of payments, instead of 20 years, as long as the loan balance is not greater than $12,000.
- Covering a borrower’s unpaid monthly interest so the loan balance won’t increase so long as they make their payments.
Public Student Loan Forgiveness
So far, $32 billion in student debt relief has been approved for more than 1.6 million borrowers, including $13 billion for borrowers and $9 billion in total and permanent disability discharges.
The Department of Education has approved over $10 billion in debt relief for more than 175,000 borrowers as part of the Public Service Loan Forgiveness (PSLF) program.
A Clean Slate
With this big announcement, millions of students now have more financial freedom. Go here if you have more questions about this program and how it could impact your life as a student and professional.
