What the New Student Loan Debt Relief Plan Means for You
When the student loan debt forgiveness plan was announced, students all over the United States let out a collective sigh of relief. With the cost of college on the rise, student debt has become a massive source of stress for a wide age range of students and professionals alike. In fact, according to Forbes, the average person in 2022 owes about $29,000 in student debt.
When you graduate from college and are trying to get started on your own, a $29,000 price tag hanging over your head is a massive source of stress and anxiety. How are you supposed to pay all of that off when so many Americans continue to work paycheck to paycheck?
That’s where the Biden Administration has stepped in. With the Biden Administration’s student loan debt forgiveness plan, students with federal loans may qualify for up to $20,000 in federal debt relief. Do you have student loans? Does loan forgiveness seem like a pipe dream? This student loan debt forgiveness program may be able to help.
Steps to the Plan
As the student loan debt forgiveness program starts its rollout this year, you should know that there are a few steps to the process to make things more effective and run more smoothly. These steps include:
Step One: Pausing Student Loan Repayment One More Time
During the COVID-19 pandemic, businesses left and right was having to close temporarily, reduce hours, furlough and lay off people—and more—due to the quarantine periods and other restrictions put in place during this time. Because of this, a record number of people lost their jobs or suddenly found themselves with a strikingly smaller income than they were used to.
This is why student loan repayments were paused during the height of the pandemic. The uncertainty of income, the uncertainty of the disease, and the uncertainty of potential new regulations made it nearly impossible for Americans to continue to make their student loan payments consistently. As part of his debt relief program, President Biden will continue to pause these payments for a final time, with an end date of December 31, 2022. In January 2023, payments will resume.
Step Two: Giving Additional Relief to Lower-Income Families
Lower-income families typically have the highest college dropout rate, and the reason why is usually because of the cost of attending college. Even though your college advisor can help you apply for scholarships and loans, sometimes even that additional help isn’t enough to get you through a traditional four-year college.
If you or your student were a Pell Grant recipient, then you may be eligible for up to $20,000 of student loan debt forgiveness. Additionally, if you work for a non-profit, the military, or a federal, state, local, or Tribal government, you may also qualify for additional student debt relief.
To be eligible for this relief, your income cannot be greater than $125,000 (or $250,000 for married couples), making this debt relief more accessible for those with a lower income. It eases the burden of student loan repayment and, because of the loan forgiveness promise, may hopefully lower the college dropout rate for lower-income students.
Step Three: Making the Student Loan System More Manageable for Future College Students
The Biden-Harris Administration is actively trying to make sure that future generations will not have to be so burdened by student loans. Loan forgiveness is a tool they can use to start that process.
In short, this new rule would:
- Reduce the payment amount of student loan payments per month for those who are currently repaying loans
- Raise the amount of income that is protected from being used as a tool to calculate monthly payments
- Forgive student loan balances after 10 years instead of 20 if the balance is below $12,000
- Not raise the amount of interest so the amount of the loan will not increase over time
Should these objectives come into play, then the future of student loan debt forgiveness may change as we know it.
How Does This Affect Me?
How you’re going to pay for college should be the least of your worries when you’re getting ready to embark on a brand new chapter in your life. With this student loan debt forgiveness plan and the potential restructuring of how student loan debt works, then students of all ages may be encouraged to pursue higher education without worrying about if they’ll have enough money to continue that education. Plus, your college advisor may be able to help you apply for even more scholarships, loans, or grants to help you achieve those goals.
If you’re a college graduate, then this new plan likely feels like an oasis in the desert. Student loan repayment can seem like a herculean task when you’re going at it alone, and this debt forgiveness program can help alleviate some of that stress.
The Current Pause on Applications
Currently, due to some court rulings currently blocking the debt relief program, applications have been put on hold. If you are one of the thousands who have already applied to have their debt forgiven, then your application is currently being held until the application process can continue.
If you have not yet been able to apply, then don’t worry. The Biden-Harris Administration is currently seeking to overturn these orders and renew the debt forgiveness program as quickly as possible. When applications can resume, you will have until December 31, 2023, to apply for this debt relief program.
How Can Clark College Consulting Help?
Here at Clark College Consulting, we want to take the stress out of applying for college, and that includes taking the stress out of figuring out how to pay for it, too. With this new student loan debt forgiveness program, your college advisor here at Clark College Consulting will be able to more accurately advise you on the best course of action for your college career. Plus, because of the potential debt relief and easier repayment options in the future, your advisor will be able to assist you more than ever before.
Applying for college should be fun, exciting, and stress-free. If you need an extra bit of advice, let Clark College Consulting help.
