Today President Biden, Vice President Harris, and the U.S. Department of Education announced a three part student loan debt relief plan to help federal student loan borrowers following the pandemic. The three part plan includes an extension of the pause on student loan payments, debt cancellation, and proposal to create an income-driven repayment plan to help lower future monthly payments.
You may be asking “What does the new student loan relief mean to me?” and “How do I get the student loan relief?”. Don’t worry, we have you covered. Here is a breakdown of what is in the plan and how you can get student loan debt relief.
What is in the Biden-Harris Student Debt Relief Plan?
Student Loan Payment Pause
- The student loan payment pause that was set to expire 8/31/2022 has been extended to Dec 31, 2022 for federal student loans.
Note the pause includes suspension of loan payments, 0% interest, and stopped collections on defaulted loans. You may also see a lower student loan interest deduction when you file your taxes if you have been taking advantage of the student loan payment pause this year.
- Up to $10,000 in debt cancellation for federal student loans and
- Up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education if individual income is less than $125,000 and less than $250,000 for households
Borrowers employed by non-profits, the military, or federal, state, tribal or local government may be eligible to have all of their student loan debt forgiven through the Public Service Loan Forgiveness Program.
Proposal to Create New Income-Driven Repayment Plan
The Biden-Harris Administration is also proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower-and middle-income borrowers.
The new proposed plan:
- Would require the borrower to pay no more than 5% of discretionary income on undergraduate loans instead of 10% under most current income-driven repayment plans
- Would raise the income requirement for repayment guaranteeing that borrowers making under 225% of the Federal Poverty Level (about the annual equivalent of $15 minimum wage) will not have to make a monthly payment.
- Would forgive balances of $12,000 or less after 10 years of payments instead of 20 years
- Would cover borrowers unpaid monthly interest so that unlike existing income-driven repayment plans, borrowers loan balances will not grow as long as they are making monthly payments.
Do I Need to Do Anything to Receive the Pause on Student Loan Payments?
No you don’t need to do anything. The extension will be automatic.
How Do I Know If I’m Eligible for Student Loan Debt Cancellation and How Do I Get It?
If you meet the income thresholds you may receive relief automatically because of relevant income data already available to the U.S. Department of Education. If you think the U.S. Department of Education doesn’t have your income data or if you don’t know if the U.S. Department of Education has your income data, the Administration will launch an application in the coming weeks, which will be available before the pause on federal student loan repayments ends on December 31st.
If you would like to be notified by the U.S. Department of Education when the application is open, please sign up at the Department of Education subscription page.
Check back with the blog for more up to date information and details as additional guidance is issued.