This week, the White House announced a vast plan to cancel student loan debt millions of Americans. The initiative will cancel up to $10,000 of debt for some borrowers and $20,000 for others. Here’s how to find out if you qualify for loan forgiveness, how you can get your hands on the money, and how the program will affect student loans in the future.
Who is eligible for student loan relief?
If you are an individual borrower earning up to $125,000 per year or a married couple or head of household earning up to $250,000 per year, you may qualify for federal student loan forgiveness of up to 10 $000. If you were a Pell Grant recipient during your undergraduate studies and your income is below the above guidelines, you will be eligible to receive $20,000 in loan forgiveness. (Hthere is how to find out if you were a Pell Grant recipient.) If you are currently a student and declared dependent by your parents, the loan forgiveness is based on your parental income.
Where can I register for loan forgiveness?
Nearly 8 million borrowers are expected to receive automatic debt forgiveness, as the Ministry of Education already has their income information. Everyone is going to have to jump through a hoop or two.
At this time, the Department of Education has not revealed details of the application process, but the White House promises the DOP will “work quickly and efficiently” to put it in place. They say the app will be available before the current student loan repayment break expires at the end of the year. You can register on the Ministry of Education website be among the first informed.
What about the rest of my loans?
Immediate debt repayment is the eye-catching part of Biden’s plan, but what is done for people who hold more than 10,000 or 20,000 in student debt and future borrowers may prove to be the more impactful. Here’s what paying a student loan might look like in the future.
- Lower monthly payments: Biden’s plan reduces the maximum loan payment amount from his current 10% salary to 5% and eliminates all loan payments for borrowers earning less than 225% of the federal minimum wage, or about $15 an hour. .
- Loan forgiveness: Borrowers with less than $12,000 in debt can have their loan balance forgiven after making regular payments for 10 years.
- Unpaid interest covered: With the new plan, your loan balance won’t increase if your monthly payment is less than your interest payment, eliminating the treadmill of making payments only for the amount you owe to increase.
Control the cost of college
In addition to shifting some of the burden of paying for college education from low- and middle-income people, the plan also calls for greater accountability from educational institutions, including “the release of an annual program watchlist with the worst debt levels in the country”. and “ask the worst performers for institutional improvement plans that outline how colleges with the most concerning debt scores intend to reduce debt levels.”
But will it really happen? (And should we be thanking George W. Bush if that’s the case?)
A presidential proclamation of an expansion plan without a bill passed by Congress is far from a certainty. While it’s not as flimsy as an executive order, the basis for Biden to make these changes isn’t necessarily solid either. The Biden administration claims authority under the HERO (Higher Education Relief Opportunities) Act of 2003, a Bush-era law that allows the Secretary of Education to “amend federal program requirements for student financial assistance to assist students and their families or academic institutions affected by war, other military operation or national emergency.
In the opinion of the Biden administration and the Office of Legal Counsel, COVID-19 counts as the emergency, but that’s unlikely to be a view shared by everyone. If a legal challenge is mounted to loan forgiveness—and I bet it will be—the fthe federal courts will determine the extent of the administration’s power and which parts (if any) of the plan are ultimately legal.