On August 24th, 2022, President Joe Biden announced a sweeping plan to cancel up to $20,000 in federal student loan debt and an extension of the repayment freeze until the end of the year. Debt forgiveness applies only to those earning less than $125,000 a year ($250,000 for married couples). The $20,000 available only to those that received a Pell grant in college. Non-Pell borrowers who meet the income requirements qualify for $10,000 of forgiveness from federal loans.
The second part of the plan is an extension of the pause on student loan repayments for the last time until December 31st, 2022. A third part includes changes to the income-based repayment plan rules that says those with undergraduate degrees and a Pell Grant will have their repayments capped at 5% of monthly income.
Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education. Though, the plan doesn’t specify how these earnings figures are calculated or to which tax year they apply.
The department of education estimates that among those that are no longer in college: 90% of relief dollars will go to those earning less than $75k a year.
Borrowers should expect an application to be available by early October 2022. Once they submit their application, they can expect relief within 4-6 weeks according to FAFSA website.
The Department of Education advises borrowers apply before the November 15th, 2022 to receive relief before the payment pause expires.
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