The new Student Loan Forgiveness program

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President Biden's Student Loan Forgiveness

By: Peter VanderWoude, CPA

The Biden-Harris Administration's Student Debt Relief Plan Summary

President Biden’s recent student loan forgiveness plan will forgive up to $10,000 in federal student loan debt for anyone who makes less than $125,000 a year. People who went to college on Federal Pell Grants, which are reserved for undergraduates with the most significant financial need, can have up to $20,000 forgiven.

 

Will the student loan payment freeze be extended?

 Biden said the payment freeze will be extended one last time, from August 31, 2022, to December 31, 2022. The freeze started in 2020 to help people struggling financially during the COVID-19 pandemic and it’s been extended several times since. Interest rates will remain at 0% until repayments start. Under an earlier extension announced in April, people who were behind on payments before the pandemic will automatically be put in good standing.

 

Who will qualify for student loan forgiveness?

 Under Biden’s initiative, borrowers must earn less than $125,000 per year (or $250,000 if married) to be eligible for loan forgiveness. U.S. Department of Education (DOE) officials indicated that an official student loan forgiveness application for the program will be made available by early October. After a borrower submits the application, the DOE expects to provide the relief within four to six weeks.

Officials are encouraging borrowers to submit their application by November 15, 2022, to receive loan forgiveness prior to the student loan pause ending in December. However, applications received after this date will still be processed on a rolling basis.

The debt forgiveness is expected to apply only to those currently holding student debt. But if you’ve voluntarily made payments since March 2020, when payments were paused, you can request a refund for those payments, according to the Federal Office of Student Aid.  Contact your loan servicer to request a refund.

DOE officials confirmed that the Biden student loan forgiveness initiative is a one-time opportunity, so borrowers should not expect this to happen again.

Additional details on the Biden student loan forgiveness initiative can be found here.  Borrowers can sign up here to get a notification when the student loan forgiveness application is ready.