Many students suffer when it comes to dealing with student loans. Unfortunately, these loans are necessary so students can pay for higher education costs. Despite the fact that student loans are the only way to pay for college for some students, this could also mean piling up debt that is worth thousands of dollars. With that in mind, it is essential for people, especially post-graduates, to know what is happening with student loan cancellations. If you do not already know, President Biden recently declared that he will be forgiving student loan debt for qualifying students.
President Joe Biden Will be Forgiving Student Loan Debt for Qualifying Borrowers, But How Will That Happen?
President Joe Biden declared in an announcement on August 24, 2022, that he would be canceling federal student loans for a lot of borrowers across the United States. The announcement did not come as a surprise since President Biden promoted debt relief for Americans all over the nation during his presidential campaign. Other than canceling student loans, he is also expanding the pause on payments for federal student loans. The original plan was that the pause on these payments would expire on August 31st, 2022. Fortunately, the pause was extended to expire on December 31st, 2022.
President Biden also discussed new income-based repayment plans. He stated that these new plans would have a limit on the amount that students pay every month on undergraduate loans. This limit will take into account the discretionary earnings of each borrower. The limit would amount to 5% of the borrower’s discretionary earnings. Since most plans at the moment have a 10% rate, these new plans will significantly help out students.
How much in Student Loans Will Be Canceled?
Eligible students can receive forgiveness on a maximum of $20,000 of student debt. On the other hand, borrowers that do not meet the requirements can receive forgiveness with a maximum of $10,000. You should remember that this does not apply to all students that have student loan debts–only those that qualify.
Qualifying for Student Loan Relief
Whether you are a current student or used to be a student, it doesn’t really matter when it comes to qualifying for student loan relief. The eligibility criteria will focus on a student’s level of income. There are conditions that borrowers need to fall under. To be eligible for student loan forgiveness, a borrower needs to earn amounts no higher than:
- $125,000 as a single filer each year
- $250,000 as a couple filing together each year
Borrowers that meet the income requirements will be eligible for $10,000 worth of student debt forgiveness. These levels of income will refer to the 2020 or 2021 tax year. Students that were defined as dependents will use their parent’s income as the determining factor, as opposed to their own income.
Additionally, it should be noted that borrowers that meet the income requirement and were awarded a Pell Grant will be eligible for $20,000 worth of student loan forgiveness. This is a great advantage because most student loan borrowers were awarded this grant!
Unfortunately, there are students who cannot be eligible. This includes students who have private student loans. Only borrowers with federal student loans can qualify for this forgiveness.
Getting This Type of Student Loan Support
To get student loan forgiveness, students will have to fill out an application. The United States Department of Education (ED) is working on an application form for students to use. In the coming months, these forms will be available for everyone.
The Different Loans that Qualify for Relief
Student loan relief will be accessible to students who have at least one of the three different types of loans:
- Loans for Undergraduates
- Loans for Graduates
- Parent Plus loans
The Number of People Who Will Benefit From Student Loan Relief
According to the White House, it is calculated that 43 million student loan borrowers will gain from this type of support. Additionally, there might be an elimination of remaining student loan balances for up to 20 million students. For context, about 45 million Americans across the United States have some type of student loan debt.
Is This Type of Relief the Same Option That Forgave Billions of Dollars Worth of Student Loans?
If you are talking about when President Biden canceled $25 billion worth of student loans, then you should know that this type of relief is a whole other thing! President Biden forgave student loan debt completely for eligible student borrowers:
- Students that have a complete and permanent disability
- Loan forgiveness for public service positions
- Borrower defense for repaying student loans and schools closing down
This recent opportunity that allows $20,000 of student loan debt to be canceled is different. It will focus on canceling student loans for eligible student loan borrowers that fall within a particular restriction in income.
Do You Need Financial Support with Student Loans and Are Not Eligible for Relief?
If you are struggling with managing your student loans and are not eligible for relief, then you might feel a little lost. Fortunately, you don’t have to feel that way. There are some financial tips that can help you work on your current financial situation. These tips include:
- Consider The Possibility of Consolidating Your Student Loans
- Look Through the Teacher Loan Forgiveness Program
Consider The Possibility of Consolidating Your Student Loans
If you have several student loans at the same time, you will be dealing with several interest rates and repayment deadlines. You might gain a lot from consolidating your student loans, which merge all your loans into one. The best part of consolidating your loans means you will only have to make one payment each month and worry about one interest rate.
Look Through the Teacher Loan Forgiveness Program
While you might not be eligible for any of the financial support we mentioned above, you might be eligible for other forms of assistance. This includes the Teacher Loan Forgiveness Program, which allows forgiveness of a maximum amount of $17,500 in federal direct loans. On the other hand, this does not apply to PLUS loans. To gain this type of support, a student needs to have been a teacher for five consecutive years. They would be required to have been a teacher in a qualifying low-income educational institution or agency. The duration of time must have been at least one year after the 1997-1998 academic school year.
The Final Verdict
President Biden made an announcement on August 24th, 2022 about student loans. The announcement included that they will:
- Forgive up to $20,000 on student loans for eligible student borrowers
- Expand the time for the pause on payments for federal loans
- Have the option for a new income-driven repayment plan with a payment limit per month worth 5% of a borrower’s discretionary earnings
With this form of support, many students can take deep breaths and calm down. Approximately 43 million student borrowers will benefit from this type of support. However, not anyone can qualify for this kind of student debt relief. To be eligible for this student loan forgiveness, students will need to fill out and send in an application to the Department of Education. The Department of Education is currently working on applications available to the public in the coming months. Fortunately, many borrowers will find the remainder of their student loans disappear!