STUDENT LOAN DEBT: What Wednesday’s announcement means for you
WASHINGTON, D.C. (KAIT) – Recent actions on Capitol Hill have many wondering what they need to do to make sure they get the necessary help on their student loans.
On Wednesday, Aug. 24, President Joe Biden announced a three-part plan to help working and middle-class federal student loan borrowers transition back to regular payments as pandemic-related support expires. The announcement includes loan forgiveness of up to $20,000 and extending the pause on loan payments to Dec. 31.
The big question: What do you do next?
The U.S. Department of Education provided a full list of what you should know regarding Wednesday’s announcement.
Student Loan Repayment Pause
Per Biden’s announcement, the pause of student loan repayments will be extended for a final time through Dec. 31, with payments resuming in Jan. 2023.
The White House has extended the student loan repayment pause several times due to economic challenges created by the pandemic.
According to the ED, the extended pause will occur automatically, and you do not need to do anything for the change to happen.
Loan Forgiveness & Eligibility
To smooth the transition back to repayment, the ED will provide up to $20,000 in debt cancellation to Pell Grant recipients. The department will also provide up to $10,000 in debt cancellation to non-Pell Grant recipients.
Borrowers are eligible for the refund if their individual income is less than $125,000 for individuals or $250,000 for households.
Additionally, borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local governments may be eligible to have all their student loans forgiven through the Public Service Loan Forgiveness program.
The ED said this is because of time-limited changes that waive certain eligibility criteria in the PSLF program. These will expire on Oct. 31.
Enrollments on or after Nov. 1 will not be eligible for this treatment.
For more information on eligibility and requirements, visit the program’s website.
The ED said nearly eight million borrowers may be eligible to receive relief automatically because relevant income data is already available to the department.
Officials explain if the ED does not have your income data, or if you do not know if the department has your income data, there will be a simple application launched soon.
The application for loan forgiveness will be available before the pause on loan repayments ends in December. You can sign up here to receive a notification when the application is open.
Payments for Current and Future Borrowers
The White House also proposed a rule to create a new income-drive repayment plan to reduce future monthly payments for lower and middle-income borrowers.
According to the ED, the rule would do the following:
- Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment
- Forgive loan balances after 10 years of payments for borrowers with loan balances of $12,000 or less
- Cover the borrower’s unpaid monthly interest
For more information on the student loan plan, visit the ED’s website.
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