The Biden Administration, on August 24, 2022, announced a federal Student Debt Relief Plan that will help low to middle-income families or individuals with a one-time student debt relief. Additionally, the plan contains three parts that aim to transition the system back to regularity in the post-pandemic United States; debt relief is just one part of this plan. The Administration also aims to create a more stable, forgiving, and manageable system with some of the proposed changes to income-based repayment plans.
Plan details are still developing after the announcement and will continue to be announced as the weeks go on. Currently, enrollment for the plan is scheduled to open in early October. If you sign up at The Department of Education Subscription Page, you can be notified when the program officially opens. All that is required is your contact email address, and you can get information for various Department of Education developments. You will have until December 31, 2023, to apply to the program.
It is important to note that all parts of the plan relate to federally held student loans. Loans through private financiers (such as Sallie Mae, Citizens Financial, Earnest, or SoFi) are not eligible for debt relief or other plan benefits.
The Three-Part Plan
As mentioned before, the proposed plan consists of three parts. The first two parts of the project (repayment pause and debt forgiveness) already appear to be confirmed by the Administration. However, the third part of the plan seems to contain only proposed rule changes, which may develop as time goes on.
The first part of the plan created a final extension for the repayment pause that has been active throughout the pandemic. The repayment pause means that student loan borrowers are not required to make payments to their loan servicer while the pause is active. Additionally, interest on loans has not been accruing during the repayment pause. This final extension will last until December 31 of 2022. Beginning January 1 of 2023, student loan borrowers will have to repay their loans, and interest will again start accruing. The extension until 2023 is automatic, and no action needs to be taken by student loan borrowers.
The second part of the plan seems to be what all the buzz is about. When the repayment period begins (January 1, 2023), student loan borrowers who are at risk for delinquencies or defaults can apply for the debt relief program. Borrowers are eligible for relief if their income is less than $125,000 or their household income is less than $250,000—student loan borrowers making more than these figures will not be eligible for debt cancellation.
The debt cancellation can be up to $10,000 for individuals who meet the criteria above or up to $20,000 for individuals who received a federal Pell Grant and meet the criteria above. For information on how to check if you received a Pell Grant, click here.
Debt cancellation is up to the specified amount, meaning that if you have $5,000 in federally held student debt but qualify for $10,000, you only receive $5,000 in cancellations. The cancellation is one-time and does not apply to loans in the future.
Some student loan borrowers will receive relief automatically because their relevant income data is available to the Department of Education. However, do not assume you will automatically receive the debt cancellation. Everyone is encouraged to file an application. Don't rely on automatic payment. Borrowers who apply are expected to receive the debt cancellation within 4-6 weeks of their application completion and submission. Once again, it is likely that the program will begin accepting applications in early October 2022.
In preparing for your application, log in to your StudentAid.gov account and update your contact information, make sure your loan servicer has your contact information, and gather the relevant information about your loan servicer.
Public Service Loan Forgiveness (PSLF) temporary changes remain available through October 31, 2022. The PSLF program is a federal program that forgives federal student loans (student loans issued by the government) after 120 monthly student loan payments have been made while working full-time for: a qualifying non-profit; federal, state, or tribal government; or the military. One hundred twenty months means ten years of monthly payments.
For more information on eligibility and loan forgiveness through Public Service Loan Forgiveness, go to PSLF.gov.
The third part of the plan proposes rule changes to income-driven repayment plans. The proposed changes may:
- Change the discretionary income payment requirement to 5% instead of 10%.
- Discretionary income is your income after taxes and essential living expenses.
- Raise the level of income that is considered non-discretionary and protected from repayment.
- This means the threshold for low-income individuals could be raised.
- If you make under 225% of the federal poverty line, you are not required to make payments.
- Forgive loans under $12,000 after ten years of continuous payments, rather than 20 years.
- Make it so that a borrower's loan balance will not grow, due to interest, if payments are being made.
- This applies to individuals who are under 225% of the federal poverty level. In this case, borrowers who do not have to pay will not have their loans grow due to interest.
As mentioned, these proposed changes are not set in stone yet.
The last update to this information was September 10, 2022. Periodically check for updates on the third part of the Administration's plan to know what to expect moving into the 2023 repayment period.
Private Loan Borrowers
Private student loans are not eligible for relief in any of the parts listed above. Private student loans are not federally held loans.
In essence, private student loans are loans given to you by a bank. Federally held student loans are offered or issued by the government.
If you are struggling with private student loans or private loans related to living expenses incurred as a student, consider seeking assistance from an experienced attorney.
California Student Loan Lawyer
Fitzgerald & Campbell, APLC practice in Debt Settlement, Judgment Contests, Settlements, and Liens, Debt Collection Harassment, Debtor Protection, Collection Lawsuit Defense, and Bankruptcy. We offer various services to assist you in dealing with different debts.
If you've ever looked up "student loan lawyers near me" at Fitzgerald & Campbell, APLC, we can assist you with your Private Student Loans on a No Settlement= No Fee basis (pre-litigation cases only). These loans require experienced counsel, and there are no easy solutions. For a free consultation, call (855) 709-5788 or contact us online today.
(Disclaimer: ***We do not currently assist with Federal Student Loans because the state of the law is constantly changing, and so much is unknown about what the government will do tomorrow that we don't believe we can give competent advice that will remain valid. When this changes, we will again assist with federal student loans.)