How to qualify for Student Loan debt forgiveness?

As it relates to Student Loan Debt; “I guess we didn’t do it, Joe!”

The Supreme Court struck down President Biden’s student loan cancellation. The TFG crew discusses the recent Supreme Court rulings and how these decisions will impact our lives and the entire country. To offset this setback, the Biden-Harris administration is implementing a new student loan forgiveness plan.

Borrowers who face significant hardships could potentially qualify for relief.

The new program is being developed by the Education Department. The Education Department released draft regulations identifying four categories of borrowers who could qualify for student loan forgiveness. This includes those who owe more money now than what they originally borrowed, those who attended predatory schools, those who took out student loans more than 25 years ago, and those who qualify for existing loan forgiveness programs and haven’t applied.

Currently, Americans own $1.77 trillion in federal and private student loan debt as of the second quarter of 2023. That’s up 1.25% from the second quarter of 2022. $128.77 billion of that total through March 31, 2023, is private student loan debt. Student loan payments cost between $200 and $299 on average, but that figure can vary significantly.

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Targeted debt relief to low- and middle-income families

kamala harris seating down and blinking out in a social space

With Plan A out, time for Plan B?

To smooth the transition back to repayment and help borrowers at the highest risk of delinquencies or default once payments resume, the Dept. of Education will provide up to $20,000 in debt relief to Pell Grant recipients with loans held by the Dept. of Education and up to $10,000 in debt relief to non-Pell Grant recipients.

Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for households.

Get details about one-time student loan debt relief

Making student loan debt manageable

The Biden-Harris Administration proposed a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers. The draft rule would:

Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
Cover the borrower’s unpaid monthly interest, so that, unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.

For Borrowers Experiencing Hardship

The Dept. of Education rulemaking committee highlighted categories that could indicate a borrower is facing significant hardship:

Borrowers who attended a school that closed.
People who received the Pell Grant, a form of financial aid that does not have to be repaid and is only awarded to students with demonstrated financial need.
Borrowers who have student loans that they borrowed for their education, as well as Parent PLUS loans that they took out for a child’s undergraduate education.
Those who are on Medicare and do not have a Medicare Income-Related Monthly Adjustment Amount. That means their income would be below $97,000 as a single individual.
People who receive an Affordable Care Act subsidy would indicate that they earn less than 400 percent of the federal poverty limit under applicable guidelines.
Borrowers with significant childcare or dependent care expenses.
Those who are burdened by significant medical expenses or have significant medical conditions may not qualify for student loan forgiveness through the Total and Permanent Disability discharge program.
Individuals who have had to file for bankruptcy but did not receive a discharge of their student debt.
Elderly borrowers.

Further Student Loan Forgiveness Reading

The Story behind the Financial Griot Podcast:

The Financial Griot is a play on two words (Finance + Griot) that hold significance in closing the wealth gap while embracing our differences. We tell the stories that others don’t. Stories about growth, opportunity, and embracing changes.

Like a lot of first-generation Americans, we took on student loans and have been battling through them ever since. Instead of merely paying down debt, we endeavored to simultaneously invest for the long term.

This helped reduce our taxable income, our student loan payments, etc. You don’t have to pick the miser life to become a millionaire in your lifetime.

We gladly share the secrets if you want them since the opportunity is abundant and Win-Win. Each of these secrets is shared in our podcast, episode after episode. In the end, this is a journey of a thousand words and a thousand more decisions on your part.

Find the TFG Crew Hosts on Instagram

Alainta Alcin – Blogger, Travel and Money Enthusiast @alainta_alcin
Lawrence Delva-Gonzalez, Financial Blogger, and Educator @theneighborhoodfinanceguy
Lovely Merdelus – Entrepreneur and Small Business Growth Specialist @lovelymerdelus