The Biden-Harris administration and the Department of Education has approved a student loan forgiveness plan to help ease the financial burden on graduates and current students. A whitehouse.gov press release published on Aug. 24 claims that this plan could provide relief for up to 43 million borrowers.
The Student Loan Forgiveness Plan includes forgiveness for undergraduate federal loans, lower monthly loan payments, and a final extension to the current student loan payment pause. Director of Financial Aid at Cal Poly Humboldt, Peggy Metzger, explained that this plan is tentative, but more information will be coming by December of this year.
“A lot of times when new bills are passed or when new orders come from the president it’s like ‘okay we’re gonna do this’ and then the folks at the Department of Education and the federal student aid office have to figure out how to make it happen,” Metzger said. “That part all still has to happen.”
Who is eligible for what?
Individuals who have qualified for a Federal Pell Grant can receive up to $20,000 of debt cancellation, while non-Pell Grant recipients can only receive up to $10,000, according to the Federal Student Aid website. To be eligible to have your student loan debt forgiven, you must meet both of the following equirements:
• Have had a federal student loan disbursed prior to June 30 of this year
• Make less than $125,000 annually ($250,000 for married couples)
“The government knows what Pell Grant you took out. The government knows how much loan you took out, and the government through the IRS knows what your income is,” Metzger said. “So theoretically, they should be able to take all of that together and go ‘look you fit this [eligible] category’.”
Metzger explained that notices should automatically be sent in December to students and graduates if they qualify for loan forgiveness. Individuals who do not receive an eligibility letter can apply on the Federal Student Aid website, however it is still unsure how the application process will look and when it will open.
How do graduates benefit?
Graduates are able to benefit from the final loan payment pause that will last until Dec. 31. This system was implemented during the height of the COVID-19 pandemic to help ease the financial burden o paying off student loans while also facing job insecurity, according to the Federal Student Aid website.
Monthly loan payments will also become more manageable after this plan’s implementation. According to the White House press release, the Department of Education intends to, “Cut in half the amount that borrowers have to pay each month from 10 percent to 5 percent of discretionary income.” Borrowers with original loan balances below $12,000 may have their loans forgiven after 10 years of payment.
The Federal Student Aid website states that anyone making less than 225 percent of the federal poverty level (annual equivalent of minimum wage income) will not have to make monthly payments and won’t be charged interest while their payments are paused. Borrowers who do have monthly payments because they make more than minimum wage also will not accrue interest so long as they continue to make their monthly payments.
For more information visit student aid.gov or call Cal Poly Humboldt Financial Aid office at (707) 826-4321.