By: Markham Norton Mosteller Wright & Co., P.A.
On August 24, 2022, President Joe Biden announced a three-part plan regarding student loan debt to help working and middle class families with federal student loans. Part one allows up to $20,000 in student loan debt forgiveness if the taxpayer received a Pell Grant while earning their higher education. Taxpayers who did not receive a Pell Grant are eligible for $10,000 of student loan debt forgiveness. This debt loan forgiveness applies to those who earn an annual income of less than $125,000 for individuals, $250,000 for married couples, or heads of household. In some cases, borrowers are eligible to have all of their student loans forgiven. Those working in non-profit, the military, or a federal, state, Tribal, or local government can see if they are eligible for the Public Service Loan Forgiveness program by visiting www.PSLF.gov before October 31, 2022.
The second part of this plan extends the pause on student loan repayments until December 31, 2022. This is said to be the final time a pause on repayment will be extended. President Biden feels this extension will allow a smoother transition back to repayment and help prevent unnecessary defaults as taxpayers prepare to resume payments. No action needs to be taken at this time since the extended pause in repayment will occur automatically.
Part three of the plan will modify the income-based repayment plan rules. Taxpayers with undergraduate degrees or the Pell Grant repayments will be capped at 5% of their monthly income.
Nearly eight million borrowers may be eligible to receive relief automatically since the borrower’s income data is already available to the U.S. Department of Education. If you are unsure that the Department of Education has your information, there will be a simple application made available in the coming weeks that you can complete for inclusion. This application will be released before the December 31, 2022, deadline for student loan repayments to begin.
If you have any questions, please do not hesitate to contact us. Our team works diligently to ensure that you have the most updated information possible so you can make the best plans and decisions for your household.
