I know, I know – it might seem like I’m late to the party, but I purposely waited to write about this topic until there was an official statement in writing from the government. While there was much speculation by major news outlets, nothing has been official until now.
As of last Thursday, the Department of Education has provided a clear overview of the student loan forgiveness program, including the income limits and necessary steps to apply.
Here is an overview of the Student Debt Relief Plan:
What is it?
Back in August, President Biden and the Secretary of Education announced a three-part student loan relief plan. For many weeks, there was uncertainty about what exactly would be included and who would be eligible.
Here are the highlights:
- Federal student loan repayments have been deferred through the end of the year
- Low- and middle-income families will be eligible to have their student debt forgiven
- Income-driven repayment plans are capped at 5% of discretionary income and forgiven after 10 years
Who is eligible?
First, you must have a federal loan. This includes:
- Federal Direct Loans
- Federal Family Education Loans (FFEL)
- Federal Perkins Loans
- Subsidized Stafford, Unsubsidized Stafford, Parent PLUS, and Graduate PLUS loans
Second, your income needs to be under the following thresholds. This is based on either your 2020 or 2021 income (whichever is lower):
- Less than $125,000 for singles
- Less than $250,000 for couples
How much can be forgiven?
If you satisfy the above requirements, then you are eligible to have up to $10,000 of your student debt forgiven.
If you received a Pell Grant, then you can have up to $20,000 of student debt forgiven. Not sure if you received a Pell Grant? Here’s how to find out:
- Log in to your Federal Student Aid account here
- Select the “My Aid” section
- All of your outstanding loans and past grants will be listed
What’s next?
Any day now, the Department of Education will be launching a short online application to apply for student debt relief. Until then, you can sign up for email updates here.
After your application is submitted, the government will review it to determine if you are eligible and will work with your loan servicer to process your relief.
Once your debt is forgiven, you will receive a notification from your loan servicer. If you made payments during the forbearance, your payments will automatically be refunded to you.
Understanding the details of the student debt relief plan can not only save you money but help you sleep better at night. If you would like to work with a financial planner to walk you through your options, I would love to help you!
To learn more about becoming a client, schedule a complimentary meeting now!
Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.