Many throughout the US breathed a sigh of relief as President Joe Biden announced his highly anticipated student loan forgiveness plan on Wednesday.
With it, those earning less than $125,000 or families earning less than $250,000 could have up to $10,000 in federal student loan debt canceled. Additionally, Pell Grant recipients could have up to $20,000 erased.
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It’s a move that could bring financial relief to more than 45 million throughout the US. But after the huge news, there are many questions still up in the air.
That’s why 10 News is working for you to clear up any confusion you may have about the plan.
Do I qualify for student loan forgiveness?
If you earn less than $125,000 or $250,000 for a family, then you qualify for student loan forgiveness.
In addition, if you received Pell Grants while in college you are eligible for up to $20,000 in debt cancellations with loans held by the Department of Education.
Unfortunately, if you have a high income or live in a high-income household, meaning the top 5% of incomes, you will not be eligible for the student loan forgiveness plan.
When will I need to start repaying my loans?
You will be expected to start making student loan payments starting January 2023.
In the future, the US Department of Education hopes to make monthly payments more manageable for low-income borrowers by cutting monthly payments in half, which would be roughly 5% of a borrower’s discretionary income, according to the White House.
This move could lower student loan payments by more than $1,000 on average each year.
- What is discretionary income, anyway? It’s the remaining income you have after tax deductions, necessities, bills, etc. You can find out your discretionary income using this Student Debt Relief calculator.
Here’s what this could look like for some borrowers:
The plan will also cover the borrower’s unpaid monthly interest, meaning their loan balance will not grow if monthly payments are being made. This is also the case even if a monthly payment is $0 due to one’s income.
How do I apply for the student loan forgiveness plan?
At this time, an application to apply for the student loan forgiveness plan is not available and won’t be for another few weeks, according to the White House.
In the meantime, you can have updates on the plan sent right to your email by clicking here. Be sure to have your income data ready for the application as well.
Also, you’ll need to check your FAFSA and loan servicer accounts to see how you might be contacted regarding student loan relief.
How do I know if I’m a Pell Grant recipient?
Federal Pell Grants were created by the Higher Education Act in 1965 in an effort to ensure everyone has a chance at receiving a higher education.
They are specifically for students with the most significant financial need and usually don’t need to be paid back.
Sixty-six percent of Pell Grant Recipients come from families with an income of $30,000 or less, according to the White House. In addition, these recipients make up more than 60% of the borrower population.
To check and see if you’ve received any in the past, take a look at any financial aid letters from the Office of Federal Student Aid.
Click here to find out more about how it affects student loan forgiveness.
Will I receive a refund if I’ve already paid off my student loans?
While only those who currently owe college debt are expected to be eligible for debt relief, some who have been making payments may qualify for a refund. According to the Federal Office of Student Aid, you will be able to get a refund for any payments you made during the payment pause, which started on March 13, 2020.
In order to receive the refund, you must contact your loan servicer.
Have any more questions? Let us know in the form below!