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UPDATE - March 2023: The student loan debt relief program is currently paused while the courts debate it. They are not currently accepting applications for forgiveness. The student loan payment pause continues until they resolve the debt relief plan in court, then payments will resume 60 days after. If they do not come to a decision by June 30, 2023, payments will resume 60 days after that date.
On August 24, 2022 the President announced news that every student loan borrower has been waiting for – Biden’s student loan forgiveness plan. President Biden laid out a 3 part Student Loan Debt Relief Plan but there are still many questions that come with it.
One part of that plan is focused on student loan forgiveness.
Who is Eligible Under His Plan
Many borrowers are wondering if they are eligible for their loans to be canceled under the Student Loan Debt Relief Plan. Here are the details that he has shared so far:
- Only undergraduate loans, Graduate loans and Parent PLUS loans that are federal loans are eligible. It does not apply to private loans.
- Income is less than $125,000 a year for individuals and less than $250,000 for married couples. It will be based on either 2020 or 2021 income taxes.
- Borrowers are eligible for up to $10,000 if they have not received a Pell Grant and meet the income requirements.
- Borrowers are eligible for up to $20,000 if they did receive a Pell Grant and also meet the income requirements.
It is important to highlight that the amounts received are up to $10,000 and $20,000. If your remaining balance on your loans is less than the $10,000 or $20,000, you will only receive the amount of your balance. For example, if you only have $5,000 left on your loans then you will only receive $5,000.
How Will Biden’s Student Loan Forgiveness Work?
The Department of Education plans to put out an application for forgiveness in October. They said it will take 4-6 weeks to process before forgiveness is issued. They encourage applications to be completed by November 15th. That will give them time to process them before the end of the year when the final extension on the payment pause ends.
Does Biden Have the Ability to Cancel Student Loans?
You might think the leader of the free world has the sole ability to cancel student debt but it’s actually more complicated than that.
He initiated this plan under an executive order but that doesn’t allow him to legally cancel student loan debt without approval from Congress.1
Even House Speaker Nancy Pelosi (D-California) agrees that the President doesn’t have the sole power to cancel debt when she said “People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress.”2
What Should Borrowers Do?
My advice for student loan borrowers is to proceed with caution by doing the following:
- Make sure your information on your loans is correct. Read 3 Ways to Prepare for Student Loan Repayments in 2022.
- Stay up to date on the news of what is ACTUALLY going on, not just how the media is spinning it. As a part of staying up to date, keep a look out for the loan forgiveness application and make sure you submit it by November 15th.
I say proceed with caution because you should know what’s going on without getting your hopes up. It is still unclear if this plan will even formulate any time soon despite the optimistic tone from the White House.
Related: 3 Ways to Prepare for Student Loan Repayments in 2022
An Alternative Plan to Student Loan Forgiveness
Relying on the government is never the best plan, simply because they don’t have a very good track record.
The Public Service Loan Forgiveness (PSLF) program is a great example of that. In a January 2022 report by the Education Data Initiative, less than 0.6% of loans were forgiven.
I would hate for you to get your hopes up in case this does go to court and doesn’t go through. Although having the instant relief from debt would take some burden off your shoulders, it is still better to make your own plan to pay it off. You’re more in control that way!
Here are some resources to help you get started on canceling your own debt!
Give Yourself a Raise: How to Find an Extra $200 Each Month – This free email series will help you create a budget, which is the foundation to your student loan payoff plan.
Download my free Student Loan Recap worksheet – This will help you keep all your information organized into once space so you know exactly what your loan status is
How to Use the Debt Snowball to Pay Off Debt Faster
The Total Money Makeover by Dave Ramsey
1https://thecollegeinvestor.com/35892/is-student-loan-forgiveness-by-executive-order-legal/ 2https://thehill.com/homenews/administration/3617474-white-house-faces-legal-questions-with-student-loan-forgiveness-plan/