What is the New Student Debt Relief Plan? How to Apply for Student Loan Forgiveness, Explained

The Biden/Harris administration finally unveils its student loan forgiveness plan, and the results are more promising than many could have hoped.

Although the administration does not offer full student loan forgiveness to the majority of debt holders, it could significantly ease the pressure on former students struggling to repay sometimes monumental debt. However, the plan can get a bit confusing, as it offers different discount levels for different types of loan holders. Still, almost anyone without strong financial backing should see some return from the new policy.

What is the New Student Debt Relief Plan?

The Biden/Harris administration announced the new relief package Aug. 24 to widespread borrower enthusiasm. The plan compiles several parts, including the final extension of the student loan repayment pause and “targeted debt relief” for low- and middle-income families.

In what’s promised as the final extension of the student loan repayment pause, the White House announced repayments won’t officially resume until January 2023. That gives borrowers the rest of 2022 to get their house in order. their finances and hopefully apply themselves to getting at least some bribe from the Student Loan Forgiveness Plan. No action is required on the part of the borrower to be included in the continuous repayment pause. This will happen automatically, according to an announcement from Federal Student Aid (FSA).

Several plans also offer hope for future and current borrowers. Along with the rebate options detailed below, the Biden/Harris administration is also proposing changes to the existing income-based repayment plan. The amended plan would require repayment totaling “no more than 5%” of a borrower’s monthly “discretionary income”, down from the previous 10%. It would also increase the amount of income considered non-discretionary, thereby reducing repayment costs, canceling up to $12,000 of debt after 10 years of repayment, and covering a borrower’s unpaid monthly interest. This should help control exorbitant interest.

The plan will further ensure that borrowers “earning less than 225% of the federal poverty level” — an amount that equates to about $15 minimum wage — won’t have to repay their loans at all. In these cases, interest would also be controlled, preventing it from accumulating while borrowers are not paying on a monthly basis.

How to Apply for Student Loan Forgiveness

Enrolling for student loan forgiveness is a bit more complicated. Targeted debt relief aims to ease at least some of the borrowers’ burden and its amount varies depending on the amount owed, grants received and current position.

In order to be eligible for any amount of student debt forgiveness, borrowers must earn less than $125,000 for individuals or $250,000 for families. If you earn more than this amount, you probably won’t be able to claim a pardon. For those who fall in or below these income brackets, however, debt relief is on the way.

Borrowers who received a Pell Grant while enrolled in college are now eligible for debt forgiveness of up to $20,000. If you owe less than $20,000, the relief should cover every penny you owe. If you owe more, it will still be comforting to see $20,000 less on your overall debt.

Borrowers who did not receive a Pell Grant are still eligible for debt forgiveness, but not quite as much. Those who have never received a Pell Grant are still eligible for debt forgiveness of up to $10,000. Again, if you owe less than $10,000, the government will provide you with the money to finish paying off your student loan.

Then there is the relief offered to employees of “federal, state, tribal, or local government; military; or a qualifying non-profit organization. The Civil Service Loan Cancellation Scheme aims to cancel the remaining balance on the loans of eligible applicants once they have made 120 payments on the loan.

A number of borrowers will automatically be eligible for relief, based on existing records available at the US Department of Education. If the department does not have your income information, or you are not sure if it does, however, you will need to apply. The ministry noted its goal of making an app available to the public in the coming months, at which point people can enter their data and secure their relief. The application will be available before the end of the reimbursement pause in January 2023.

Users who want to be notified when the app becomes available can sign up to receive alerts through the Department of Education’s subscription page.