In August 2022, President Biden announced a Student Loan Forgiveness Plan that had been long awaited by many people who are strapped with thousands in student loan debt. The finer details are still being worked out, and the program still has not been implemented. There is no doubt that his plan will most likely continue to see legal challenges and hurdles along the way. Here is what we know as of today.
The most recent update: The program has currently been blocked from being enacted. Throughout 2022, there were various delays, which meant student loan deferment was extended. However, in an update on November 2022, a firm deadline was placed on deferment. That deadline is 60 days after 1) the Department of Education is permitted to implement the program, or litigation is resolved, OR 2) June 30th, 2023, whichever occurs first. That means student loan payments will begin no later than August 30th, 2023, regardless of where the forgiveness program stands.
Who is eligible for forgiveness? So far, this seems pretty straightforward. Note that this forgiveness only applies to federal student loans; if you have private loans, those will be unaffected by this program. Any individual earning less than $125,000/year or household earning less than $250,000/year would be eligible for $10,000 of forgiveness. Those that qualified for a Pell Grant could see an additional $10,000 wiped off their loans for a total of $20,000. Anyone over those income limits is seemingly not going to see any changes in their federal student loans.
It is also worth noting that there are some changes to the PSLF program as well, so borrowers who are employed by non-profit organizations, the military, or government employees (federal, state, tribal, and local) could see their entire loan forgiven.
How do I apply for forgiveness? Applications are currently paused due to the challenges this program has faced. If you think you may be eligible for forgiveness (if it gets approved), we encourage you to sign up for email updates here. The administration originally set up an application process that was available “no later than when the pause on federal student loan repayments terminates at the end of the year .”. However, an estimated few-million people could automatically see relief because their income information is already on file. Unfortunately, there’s no information to suggest who those people are, so it is prudent to periodically suffer the buffer on studentaid.gov for updates.
Other actions in the program
- Reducing income-based payment limits (Borrowers are now required to spend 5% of income on loans, previously it was 10%)
- Preventing loans from compounding when income-based payments don’t cover interest
- Loan forgiveness in 10 years (reduced from 20) for community college borrowers
- More accountability to colleges to regulate cost and deliver value
The studentaid.gov website is going to continue to see high volumes of traffic. Just like road construction during Michigan summers, expect delays. Stay in touch with your loan servicer and check back often for updates as “construction” moves forward and the White House builds out the infrastructure for student loan forgiveness. Below is a link to the original White House fact sheet. https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/
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Written by: Justin Meyer & Kyle Cooper