Biden-Harris Administration Announces Final Student Loan Plans
During their campaign, President Biden and Vice President Harris promised to provide student debt relief. On August 24, 2022, the administration announced a plan to forgive a portion of student debt and making changes to the student loan system for current and future borrowers.
If you received a Pell Grant, you may be eligible to have up to $20,000 of debt held by the Department of Education forgiven. If you did not receive a Pell Grant, you may be eligible to have up to $10,000 of debt held by the Department of Education forgiven. If you have student loans held outside of the Department of Education, those loans are not eligible for forgiveness. Graduate school loans through the Department of Education do qualify. To qualify, income must be below $125,000 for single filers or $250,000 for married or head of household filers for either 2020 or 2021. Many borrowers may not need to apply for forgiveness since Department of Education may already have a copy of your tax return, but an application will be released in the upcoming weeks to apply for forgiveness. Any amount forgiven will be tax free debt cancellation.
The administration also plans to place caps on monthly payments of undergraduate student loan repayments so that repayments are more in line with the borrower’s income. Furthermore, those who enroll in Public Service Loan Forgiveness (PSLF) program will receive appropriate credit towards loan forgiveness. The PSLF program is for those who work in the nonprofit, military, or government sectors.
In addition, the administration has postponed federal student payments one more time through December 31, 2022. This postponement originally started in March 2020 and was set to expire September 1, 2022. Borrowers can expect payment to resume on January 1, 2023.
As more specific information becomes available, Ramdas Accounting LLC is here to help you navigate the complexities of these programs. You can read the White House Press Brief here, and the U.S. Department of Education Press Brief here for more information.
