Student loan borrowers finally got the news many of them have been waiting for: President Joe Biden announced a plan to cancel up to $20,000 per borrower for individuals who meet a certain income threshold and he extended the student loan payment pause through the end of the year
Biden said more details will come this afternoon.
The payment pause was scheduled to end on August 30.
According to CNBC, there are 44 million people in the US who have student loan debt.
Here is what you need to know if you have student loans.
If you make less than $125,000 a year, you will be able to see $10,000 of your debt canceled. The recipients of the grant will be forgiven $20,000.
The income requirement is less for households. Senior administration officials told CBS that anyone with an income below the cap will be eligible.
Current students can get relief as well. The White House says that dependent students will be eligible.
Roughly 20 million borrowers will have their entire balance canceled if all eligible borrowers take advantage of their relief.
According to the Federal Reserve, four in 10 people who went to college have some debt. Almost all of the attendees say they have student loans to pay back, even though 20% of them still owe money.
The median amount of student loan debt that borrowers in America owe was between $20,000 and $24,999, but a quarter of borrowers had less than $10,000 in outstanding payments, according to the Fed.
Low- and middle-income borrowers will be the focus of the relief. Estimates from the Department of Education show that most of the relief money will go to borrowers with an annual income of less than $75,000.
More than 1.6 million borrowers have received student debt relief from the Biden-Harris administration. The relief includes $13 billion for one million borrowers whose educational institutions took advantage of them, more than $10 billion for more than 175,000 public service workers and $9 billion for over 425,000 borrowers.
The White House says that borrowers can expect a straightforward process.
The Department of Education is working to set up an application by the end of the year.
The White House says that up to 8 million borrowers will receive their relief automatically because the department already has their income data.
Debt relief will not be taxed.
There will be more information available in the coming weeks. When this information is available at StudentAid.gov, borrowers can sign up to receive notifications.
Payments on federal student loans will be paused until December 31, 2022.
The Department of Education should give borrowers an update on the status of their loans. Payments will stay paused if you ask your student loan servicer any questions.
Student loan payments have been paused. In April, Biden extended the pause for the fourth time. The pause was set to end on August 31st.
The White House says the extension is the last one.
Changes to income-driven repayment plans were announced by the White House.
Repayments can now be capped at 5% of income. 10% of a borrower's monthly income used to be paid back.
The original loan balance of less than $12,000 will be forgiven after 10 years of payments. The Department of Education says the change will allow most borrowers to be debt-free within 10 years.
The White House raised the amount of income that is considered non-discretionary in order to protect it from repayments. Most borrowers who make an annual minimum wage will be protected from debt payments.
The Department of Education will be able to collect income data every year as a result of the changes. In the summer of 2023, this change will take effect.
According to experts, borrowers should prepare to make payments again.
Scott Buchanan is the executive director of the Student Loan Servicing Alliance.
Buchanan said that borrowers should plan for when payments resume.
To your servicer, talk. Put your monthly payment into a savings account or reserve it in your checking account if you want to make sure you don't run out of money. Pretend that you make that payment monthly.
The pause doesn't stop borrowers from making payments It is possible for borrowers to make a one-time payment or resume monthly payments by contacting their servicer. The office says that making payments may save borrowers money in the long run.
The story is evolving and will be updated.
Forgiveness of student loans may be easier in the near future. That could mean something for you.
Students were lied to. They don't have to pay back their loans.
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