The Biden administration’s student loan forgiveness plan will forgive up to $20,000 in debt for millions of federal loan borrowers. Does this plan apply to you or your family? Let’s take a closer look at the plan and what it entails:
The Student Loan Debt Relief Plan: Who is eligible?
The student loan relief plan will forgive up to $10,000 in federal loans for eligible borrowers, or up to $20,000 for Pell Grant recipients.
The income limits to receive debt relief is up to $125,000 for an individual filer, or up to $250,000 for married filing jointly. That income amount is based on your adjusted gross income from 2020 or 2021.
Additionally, your loans must have been dispersed as of June 30, 2022. Parent and graduate school loans are included in this forgiveness plan.
What if your income is above the threshold?
If you made higher than the income limits in 2020 or 2021, you most likely will not be applicable for this debt relief plan.
That doesn’t mean you’re totally out of luck. If you’re a business owner and have not filed your 2021 taxes, you could add more to your retirement accounts to bring down your AGI low enough to qualify for loan forgiveness.
Or, you could take advantage of other forgiveness programs. The Public Service Loan Forgiveness (PSLF) program was expanded last fall to allow more borrowers to receive a credit for repayments they made in the past. This limited waiver is only available until Oct. 31, 2022, so look into it now if you think you might be eligible.
What if I’ve been paying off my loans during the payment pause?
You might be eligible for a credit for those payments. As long as your 2020 or 2021 income fits within the limits, you can receive a refund for payments beginning March 13, 2020.
How can I apply for the Student Loan Debt Relief Plan?
The debt relief application process is supposed to begin this October, and goes until Dec. 31, 2023. To get ready, make sure your contact information is up to date with your loan servicer so they can notify you of the next steps.
Keep in mind that loan payments are set to resume in January 2023, so you should apply by the beginning of November to avoid having to pay if you don’t have to.
Prepare for payments to resume in January
If you will still owe money on your loans, you should prepare to resume payments in January. While you wait, you may want to make sure you know how to log in to your account and receive messages from your loan servicer.
You also might want to start setting money aside for those payments now, so it’s not a shock to your budget when loan payments resume.
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals.