Biden’s Student Loan Forgiveness Plan: What to Know

What the President’s Plan Means for the Millions of Americans With Student Debt.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, said. “We are in unprecedented territory,” “this has never been done before.”

With this plan, It is expected to benefit more than 43 million people in the U.S., who have a total of $1.6 trillion in student-loan debt.

President Biden’s student-loan plan would reduce or wipe out the debt of millions of borrowers.

This plan eliminates up to $10,000 in federal-loan debt for individual borrowers with annual incomes less than $125,000 or couples earning less than $250,000. Many borrowers will be eligible for a total forgiveness of up to $20,000 if they receive a Pell Grant, a form of federal financial aid provided to students from low-income families.

With this plan, It is expected to benefit more than 43 million people in the U.S., who have a total of $1.6 trillion in student-loan debt.

In addition to loan forgiveness, the president will also extend the pandemic-era student-loan pause on payments and interest until the end of the year. The measure began in March 2020 and has been repeatedly extended since then. The Federal Reserve Bank of New York estimates that it withheld about $200 billion in payments to borrowers during this period.

Who is eligible for student loan forgiveness?

Borrowers with federal student-loan debt are eligible for relief of up to $10,000 if they make less than $125,000 per year, or less than $250,000 per year for couples. The income limit applies to gross adjusted income from 2021 or 2020.

Those receiving federal Pell grants in college will also be eligible for up to $20,000 in forgiveness. About 6 in 10 borrowers with any federal loans received Pell Grants, and Pell Grant recipient graduates have about $4,500 more in debt than other graduates, according to the White House, according to federal data by the Institute for College Access. According to the 2020 analysis. and Success, an advocacy group.

According to the Federal Reserve, most student loan borrowers owe less than $25,000 on their loans as of May 2022.

Do I need to take action to get debt relief?

Not now. Mr. Buchanan said, wait until you get a notification from your loan servicer.

Be wary of any friendly-sounding phone calls or suspicious-looking emails from addresses you don’t recognize.

“It’s a very complicated process and it will take months to take effect,” he said. “Don’t do anything until you see something happening on your account.”

In the meantime, double-check the information you’ve already shared with your loan servicer and the website. If you recently moved or changed any contact information, you want to make sure they have the most up-to-date addresses, said Mark Kantrowitz, a student loan specialist.

What if I have private student loans?

Only federal loans are eligible.

What if my balance is less than $10,000?

If you owe less than $10,000 (or $20,000 for Pell grant recipients) on your loan, congratulations—you’ll now be student loan-free. President Biden’s plan will wipe out the debt of about 15 million borrowers.

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