For many students, paying off student loans is a challenge. People that want to pay for a higher education can find it necessary to take out these loans. Although some people need these loans, they can result in massive debt. That is why it’s critical to understand what’s going on with student loan cancellations. In case you did not hear, President Biden announced that he will waive qualifying borrowers’ student loan debt.
Will the Government Cancel Student Loans?
The short answer is yes! However, not all of them. On August 24, 2022, President Joe Biden made an announcement saying he would forgive federal student loans for a majority of borrowers. His campaign promise to help Americans financially around the country inspired him to take this step. In addition to canceling student loans, he put in place a continuation on the pause for federal student loan payments. Thanks to the extension, the pause will last until December 31, 2022.
Furthermore, he mentioned brand-new income-driven repayment arrangements during his announcement. According to the president, the monthly payments for undergraduate loans will be capped under the new plan. This cap would be no more than 5% of the borrower’s discretionary income. Which is significant because the majority of existing plans have a 10% rate for monthly payments.
How Much In Loans Will Be Canceled?
Since loan forgiveness will not be available to every borrower, the amount of debt forgiven will differ. Borrowers who meet the requirements may get a cancellation for up to $20,000. $10,000 will be waived for borrowers who do not qualify for that amount.
Who Qualifies for Forgiveness of Student Loans?
It makes no difference whether a student is currently enrolled or no longer enrolled at school. Income level is one of the eligibility requirements. Borrowers must follow certain standards! To be eligible for student loan forgiveness, a borrower’s income must not exceed:
- $125,000 annually for single filers
- $250,000 annually for a couple filing jointly or head of household
The $10,000 in student debt relief is available to anyone who falls within these income limits. The 2020 or 2021 tax years will be used as the reference point for these income levels. The eligibility of students who were identified as dependents will be based on their parent’s income rather than their own.
On the other hand, those who meet this income limit and have obtained a Pell Grant are eligible for $20,000 in student loan relief. Given that the majority of recipients of student loans received this grant, this is a big benefit! Unfortunately, some borrowers will not be eligible for this relief including borrowers of private student loans. This assistance is only available to borrowers of federal student loans.
How to Get Your Student Loans Canceled Under This Relief Opportunity?
If students want to fill out an application for student loan forgiveness, they can find the application online at studentaid.gov. When going through the application, they will need to provide personal details like:
- Date of Birth
- Name and Social Security Number
- Email Address and Phone Number
Another part of the application is confirming that the student meets the eligibility criteria for the forgiveness. This includes meeting income requirements. Once the application is submitted, it should take between four and six weeks to process. Applications must be submitted by December 31st, 2023. That’s the deadline!
Which Loans Are Eligible for Forgiveness?
Borrowers will be eligible for student loan relief if they have at least one of the following:
- Parent Plus loans
- Graduate loans
- Undergraduate loans
How Many People Will Benefit From Student Loan Forgiveness?
About 45 million people in the USA are in some sort of debt because of student loans. However, the White House estimates that 43 million people who have student loan debt will benefit from this relief. Additionally, they anticipate that the outstanding student loan balances for up to 20 million debtors will be fully forgiven.
What is the Difference Between This Relief and the Loan Forgiveness That Canceled Billions in Student Loans?
It’s worth noting that this forgiveness is quite different from the $25 billion in student loan cancellation that President Biden announced in the past! President Biden has completely forgiven qualifying borrowers’ student loan debt. That one included:
- Borrowers who are totally and permanently disabled
- Forgiving loans for borrowers in the public service sector
- Borrower defense against school closures and loan repayment
This most recent opportunity to cancel up to $20,000 in student loan debt is different since it aims to eliminate loans for eligible federal student loan borrowers who fall under the established income cap.
What If I Do Not Qualify For Relief But Still Need Assistance With My Student Loans?
If you are struggling to make your student loan payments but are ineligible for assistance, you might feel helpless. Fortunately, there are several assistance solutions that could instead help you with your current situation, such as:
Student Loan Consolidation
There could be several student loans you have, which could result in several interest rates and several payment deadlines. Consolidating your student loans may be in your best interest. When you combine your student loans, you essentially take two or more of them and roll them into a single loan. The advantage of this option is that you only have to take care of one monthly payment and interest rate.
The Teacher Loan Forgiveness Program
Even if you do not qualify for any of the relief opportunities we mentioned above, you may be eligible for other assistance. The Teacher Loan Forgiveness Program is one possible solution. Federal direct loan forgiveness under this program has a limit of $17,500 in total. However, you should keep in mind that PLUS loans are not included in this.
To qualify for this forgiveness, a borrower must have taught for five complete years in a row. They would need to have worked as a teacher at a low-income educational service organization or institution. It is also necessary that the borrower has taught for at least one year after the academic year of 1997-1998.
Conclusion
On August 24, 2022, President Biden announced a new plan to deal with student loans that involved:
- Up to $20,000 in student loan debt forgiveness for eligible borrowers
- Creating an extension on the pause for payments on federal student loans
- A new, income-driven repayment strategy with a 5% cap on monthly payments of the borrower’s discretionary income
Many people who are paying off college loans will feel relieved with this support. 43 million borrowers are expected to benefit from this relief. Borrowers must submit an application to the ED to benefit from this student debt forgiveness. Within the next few months, the public will be able to access applications from the ED. Many borrowers will see any outstanding debt from their student loans vanish. Be on the lookout for that application!
