pay the way student loan forgiveness
Will My
Be Forgiven ?
As of the end of 2021 , outstanding federal and private student loan debt in the United States totaled $ 1.75 trillion , with the average borrower owing nearly $ 30,000 for a bachelor ’ s degree according to Forbes . In August 2022 , the Biden- Harris Administration announced a plan to aid nearly 8 million federal student loan borrowers struggling with this debt .
If you ’ re wondering what all this means and whether or not it will impact the way you pay for college , you ’ re not alone ! We ’ re here to break down the basics of this plan and explain how it could potentially affect you as a collegebound student .
Remember : There is no credible indication that federal student loan debt will be forgiven by the government again in the future , so you should not take out student loans under the assumption that they will be forgiven later on !
What will the student debt relief plan do ?
This plan includes a final extension of loan repayments , along with a provision for federal student loan debt forgiveness . Those with federal student loans who make less than $ 125,000 annually ($ 250,000 for married couples ) qualify for up to $ 10,000 in relief . Those who meet the same income requirements and received Federal Pell Grants are eligible for up to $ 20,000 in relief .
Who is affected by the plan ?
This relief plan solely applies to people with federal student loans – loans from private lenders are not covered . In addition , only borrowers who have federal student loans that were fully disbursed on or before June 30 , 2022 are eligible for relief . That means current high school students who take out loans in the future for college will not be granted forgiveness for their loans under this plan .
How will the plan affect future college students ?
Even if you haven ’ t started college yet and do not have any current federal student loans , there ’ s a key part of this plan that may still apply to you in the future . A proposed rule based on a new income-driven repayment system plans to do a few things for both current and future federal student loan borrowers .
Monthly loan repayments will be capped at 5 % of the borrower ’ s discretionary income .
Borrowers earning under 225 % of the federal poverty level will not have to make monthly loan repayments .
Borrowers with federal student loan balances of $ 12,000 or less will have their balances forgiven after 10 years of regular repayments instead of the current 20 years .
Unpaid monthly interest will be covered so that federal student loan balances will not increase as long as regular monthly repayments are made .
24 | Winter 2022 www . potentialmagazine . com