GEORGIA, USA — Currently, there is more than $1.75 trillion in student loan debt in the United States. The Biden administration announced a student debt relief plan to help almost 43 million borrowers, and full student debt relief for almost 20 million borrowers. Here are top things to know as relief begins.
1. Loan forgiveness only applies to federal loans.
If you applied and accepted loans through the U.S. Department of Education, this is also a part of the Free Application for Federal Student Aid (FAFSA). This doesn't apply to private loans like Sallie Mae, LendKey or Sofi. Sherri Goss is the president of Rosenberg Financial Group. She says your annual income will determine how much you can receive.
You could receive up to $20,000 in student debt relief. If you make less than $125,000 a year in income, you can receive up to $10,000 in student debt forgiveness. If you have debt through the Pell Grant, an extra $10,000 could be forgiven. This all depends on how much you and your income.
2. Student loan repayment will be paused until Dec. 31, 2022.
This is the final and last time the student loans will be extended. Payments will resume in January 2023. The interest rate on the payments will still 0% until repayment starts in 2023. If you found yourself to be behind in payments before the pandemic begin two years ago, you will automatically be in good standings. Goss says "the bill proposes a repayment plan that would be tied to your income" and the less annual income you have, the lower the payments will be.
3. Loan balance forgiven after 10 years.
Before the plan, if you made monthly payments and your balance was less than $12,000 your loans would be forgiven after 20. The proposed plan is now 10 years.
Much of the relief is targeted towards giving relief to minorities and people making less than $75,000. According to the proposed plan, "the Administration’s actions are likely to help narrow the racial wealth gap."
When the process opens, you will need to update your information on the federal student loan website. This is will determine how much relief you are eligible for. There are no plans just yet on applying for repayment and the president plan could be challenged in court under his use of presidential powers. You can go to the Department of Educations website to subscribe to their mailing list so you can stay up to date.