Most of you may already know that earlier last week, President Biden signed an executive order to attack student loan forgiveness – here are the things that you need to know.
First is the amount: the amount is going to be $10,000 of student loan forgiveness for most individuals. If you received a Pell Grant, that amount goes up to $20,000.
The second thing to know is this program is based on income. So, anybody earning under $125,000 if you’re single (for those who are married filing jointly, it’s going to be anybody under $250,000) is going to help qualify you for this student loan forgiveness. However, if you’re over those thresholds you’re automatically disqualified, meaning there are no phaseouts. For students who are currently in college, if you are filing as a dependent on your parent’s tax return, this is going to look at your parent’s income to determine eligibility.
Another important piece is this program is only for federal loans. This means if you ended up refinancing your federal student loans into private loans to consolidate or help reduce the interest rates, or if private loans were what you got in the first place, unfortunately, you’re automatically disqualified. This will only be looking at federal loans, and yes, federal Parent Plus loans also qualify here too.
One piece that is not as focused on is this will also continue to defer payments on student loans. Loans were set to resume payments again on August 31st, and that has now been pushed back again to December 31st of 2022.
The cost for this is estimated to be around $300 billion, which is a lot. We also know nothing comes free, so we might see an increase in taxes, or this looks like it might wipe out the federal deficit reduction that was going to come from the Inflation Reduction Act.
The last thing to know is how to apply for these benefits. The cart might be a little bit ahead of the horse here because the program is now officially in place, but how to apply… so far, we’ve been told to just hang on as the online system’s not ready yet. So, for that piece, continue to talk to your loan providers, stay up to date, and keep an eye out just to make sure that when this program is available, that you are getting signed up to get that loan forgiveness taken care of! Y’all have a good one!