August, 2022: Three MAJOR Updates for Student Loans Borrowers
White House Announces Major Student Loan Updates
On August 24th, the Biden Administration gave some long-awaited updates on their promised overhaul of the federal student loan system. These come as just the latest in a series of reforms that have included: the Limited Waiver Opportunity for PSLF, assisting borrowers in default, holding loan servicers accountable for poor management, and forgiving federal student loan debt for millions of borrowers who were defrauded by for-profit colleges.
Biden Fulfills Campaign Promises on Student Loan Forgiveness and Beyond
When campaigning for the 2020 election, President Biden promised relief to student loan borrowers in two ways: provide immediate relief to borrowers by forgiving $10k for all borrowers, and expand access to Public Service Loan Forgiveness. While they’ve made incremental progress on the latter, the former has been slow in coming due to questions of whether the President has that authority and how much he should forgive. Borrowers finally have answers to those questions, as well as assurance that they’ll see more substantive, lasting relief on student debt.
A Breakdown of the White House Student Loan Announcement
The August student loan update is three-fold, and will affect all borrowers with federal student loans:
- The student loan payment moratorium has been given one final extension that will last through December 31, 2022. We have heard that earlier extensions would be “final,” but with this announcement of other student loan actions, it seems unlikely that the pause will be renewed again.
- Most federal student loan borrowers will receive up to $20k in debt cancellation.
- Borrowers who received need-based Pell Grants to help them pay for undergraduate education will be eligible for up to $20k of their federal loans canceled.
- Others will be eligible for up to $10k in loan cancellation.
- To be eligible for this broad federal student loan cancellation, individuals must have an income less than $125,000 per year, or $250,000 for households.
- Make the student loan system more manageable for current and future borrowers with a proposed new income-based repayment plan requiring borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. (As opposed to 10% under the most recent income-driven repayment plan.)
Besides the payment moratorium extension, neither of these changes will take effect immediately, as the Department of Education will have to collect income data for millions of Americans to determine if they qualify for student loan cancellation. If you have questions as to whether you qualify for any loan forgiveness programs, including PSLF and the Limited Waiver, we’re just a phone call away!
If you’re pursuing Public Service Loan Forgiveness and you haven’t met with us yet, schedule your free 15-minute Discovery Session to find out if you qualify for PSLF, or what you can do if you don’t.