As I am sure you have heard by now, last month President Biden released his sweeping plan for forgiving student loans, which may impact you.
As you can imagine, this is a very controversial topic!
Many of my clients have mixed feelings about this because it could offer relief, but many are concerned about the overall impact on our economy, specifically inflation, for this kind of spending!
Whether you are in favor of this or not, I do want to share the information that I have on this plan, and how it could impact you.
Bottom Line
Borrowers who received a Pell Grant could be eligible to receive up to $20,000 in student loan forgiveness. Other borrowers (who did not receive a private loan) are eligible for up to $10,000 in student loan forgiveness. This is available to those who earn less than $125,000 per year or $250,000 for married filing jointly.
Question and Answer Time!
1. Does the President Have the Authority to Pass this?
Well, this one is still out for debate! The White House is making the case that it has the authority through the HEROES Act, where the Secretary of Education could grant relief from student loan requirements during specific periods of time, like the pandemic or during national emergencies. Others believe that the President does not have the authority to do this with an executive order, so we will see in the coming weeks if this holds up in court.
2. I have student loans. Do I need to apply or will this be done automatically?
You will most likely need to apply for it. The application process will open at the beginning of October for this program. The processing time is projected to be 4-6 weeks. In the meantime, you can enroll in a free account on studentaid.gov so that you can see your student loans, and have that in place prior to October if you want to apply.
3. If I still have remaining student loan debt, when will payment resume?
The White House has said that the current extension of pausing student loan payments will be the last one. The current extension goes through the end of the year, so if you have remaining student loans, you will begin paying in January of 2023.
4. I have been paying off my student loan over the past 2 years, could I get a refund?
There is language to indicate that if you have been paying off your student loan, and this loan forgiveness would pay off all of your student loan debts, there may be an opportunity to apply for a refund. The thought process here is that people should not be punished financially for continuing to pay, even though they were not required.
5. What kinds of plans would be included in the student loan forgiveness program?
The loans managed by the Department of Education are eligible, including undergraduate loans, graduate loans, as well as Parent PLUS. Currently, the plan only applies to federal student loans, not private student loans. If you are unclear about the type of loan you have, your loan service provider should be able to help you.
Final Thoughts
Of course, things could certainly change in the coming weeks, so if you are applying for the student loan forgiveness program, you will want to keep an eye out for updates on the Federal Government’s Financial Aid page, which you can find here.
If your budget could be changing in the coming months with this student loan forgiveness plan, or even if you just want some extra help, I would love for you to join me for a Budget Bootcamp. It will be a live workshop where we will work together to get your budget in place for the fall (hello holidays!).
Don’t worry–you do not have to share your specific financial details! I can show you the guidelines and structure, and you can input the numbers for your budget.
Click here to sign up.
This will be a small group, so grab your ticket early! It is just $7. Let’s get your budget on track this fall.
To your success!
