Update June 30, 2023: The Supreme Court blocked Biden's student loan debt forgiveness plan. The Biden Administration will propose a new plan to expand income-based repayment options later this summer. As soon as we have details, we'll share them.
The Biden Administration's decision to cancel a portion of student loan debt acknowledges the pain of stifling student loan payments that keep multiple generations from owning homes, affording a reasonable lifestyle, and feeling free of financial stress.
While the cost of attending college has tripled, federal support to help students afford those costs has not kept up. Federal aid used to cover 80% of college costs, it now covers less than 35%. The latest student loan debt relief is not enough, but it's a first step in the right direction.
However, student loan forgiveness has not been approved yet, and the Supreme Court will make its decision to allow or block the student loan debt cancellation in the coming weeks. We'll update you as soon as we have an answer.
Biden's Student Loan Debt Forgiveness Plan
Key components
- Federal student loans will be forgiven up to $10,000 ($20,000 if the student attended college using Pell grants)
- Individuals who earn less than $125,000 or households earning less than $250,000 are eligible
- Forgiveness will not count as taxable income (it usually does... we know, WTF)
How to apply
If the US Dept of Education has your income information, and that income makes you eligible for forgiveness, the process should happen automatically.
If you don't have your income on file, or you aren't sure, you'll be able to apply. The application isn't availble yet, and we'll update this page as soon as it is. You can sign up for alerts directly from the Dept of Edu here.
Extension of Student Loan Payment Pause
Federal student loan payments and interest accrual have been paused since the beginning of the pandemic, and were set to resume on August 31st. Under Biden's new student loan debt plan, payments will not resume until December 31, 2022.
He swears that this is the last time the payment pause will be extended, so if you benefit from this extension, you should plan on having only 4 more months of relief. Seriously, plan on starting to pay your student loans in January 2023!
💸 Want to know what to do with your student loan payments during the extension?
💸 Want to get ahead in preparing for student loan payments to resume in August?
Improvements to Income-Based Repayment Plan
Key Features
1. The new Income-Based Repayment (IBR) Plan option would limit payments on undergraduate loans to 5% of discretionary income (previously 10%)
2. The definition of discretionary income will change to allow for lower payments
3. Balances under $12,000 will be forgiven after 10 years (previously 20) under the IBR Plan
4. Unpaid interest (for borrowers whose payments are $0 under the IBR Plan) will be forgiven as well
How to apply for the new IBR Plan
You can learn more about Income-Based Repayment Plans, log in to access your federal student loans, and apply here.
👇 Need a little help? Talk to a Bolder Money Coach about how to make the most of your student loan payments.
