President Biden’s new plan to cancel up to $10,000 in federal student loan debt for borrowers earning under $125,000 per year is a long-awaited relief for millions of Americans. In addition, the current federal student loan payment moratorium will be extended until December 31, 2022.
How does it work?
Income qualification: If you make less than $125,000 as an individual (or $250,000 as a couple), you can qualify for the loan cancellation. Additionally, students who had Pell Grants are eligible for up to $20,000 in debt forgiveness. Within the coming weeks, the Education Department will provide information about a form you must fill out to certify that you qualify under the income guidelines.
Timeliness: Federal loans must have originated before July 1 to qualify. In other words, you cannot take out a new loan now and have it be forgiven under this policy. The debt cancellation is available to both former students with college loan debt and many students who are still in school.
Who benefits most from this plan?
Nearly 90% of the planned debt cancellation for those no longer in school will go to borrowers earning less than $75,000, the Biden administration said, noting that the cost of four-year college has nearly tripled since 1980, even accounting for inflation. According to the People’s Policy Project, only 7 percent of student debt is held by the wealthiest 20 percent of Americans, while the other 93 percent is held by the less wealthy 80 percent.
If you are in need of additional guidance or assistance in navigating the new policy, please contact the Wandro & Associates team at (515) 281-1476.
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This Wandro & Associates Update is intended to inform firm clients and friends about legal developments, including recent decisions of various courts and administrative bodies. Nothing in this Practice Update should be construed as legal advice or a legal opinion, and readers should not act upon the information contained in this Update without seeking the advice of legal counsel.
