Making Sure You Benefit From The Student Loan Cancellations
Tired of paying back your student loans, well there is good news on the horizon. TFG Crew is back!
On Wednesday, August 24th, President Biden announced a massive student loan debt relief that directly impacts over 60 million Americans who hold an extensive amount of federal student loan debt. We discuss the groundbreaking news, the hidden details, massive opportunities to reengage in your tax planning strategy, and more.
Opportunities come and go.
It comes down to how you play the cards to lower your expenses and increase your wealth. While it’s a far cry from the Warren flat $50,000 student loan cancellation relief, it’s a start. Check out the Biden Administration’s Student Loan Debt Relief Plan of 2022, in detail below:
Table of Contents
Final extension of the student loan repayment pause
To ensure a smooth repayment transition post-pandemic and prevent unnecessary defaults, the Biden-Harris Administration extended the pause a final time through December 31, 2022, with payments resuming in January 2023.
Targeted debt relief to low- and middle-income families buried under student loans
The U.S. Department of Education will provide up to $20,000 in debt relief to Pell Grant recipients with loans held by the Department 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.
In addition, borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program.
This is because of time-limited changes that waive certain eligibility criteria in the PSLF program.
These temporary changes expire on October 31, 2022
Making the student loan system more manageable for current and future borrowers
Income-based repayment plans have long existed however, the Biden-Harris Administration is proposing a rule to create a new income-driven repayment plan. The aim is to substantially reduce future monthly payments for lower- and middle-income borrowers.
The 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.
Time will tell if we get it all. Until then try not to miss out on other ways to use your money to pay down debt and build wealth.
Quick Resources:
- For more information about student loan debt relief. https://studentaid.gov/debt-relief-announcement/
- To be notified when the application comes out: subscribe to the US Dept of Ed’s notifications. https://ed.gov/subscriptions and select “Federal Student Loan Borrower Updates”
- Don’t Miss Out on Your State’s Student Loan Tax Credits!
- Also read, How to Deal with Excessive Student Loan Debt Payments
- How Long Will It Take to Pay Off Your Student Loans? Check out SmartAsset’s Calculator.
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