What you might’ve missed about Student Loan Relief!
You know about the $10,000 to $20,000 in student loan relief for borrowers, but you might’ve missed some other key pieces of last week’s announcement.
It’s been a week since the Biden administration announced student loan relief for (some) borrowers. Of course, the heated debates, think pieces, and hot takes have flooded the internet. In all the discussion around this decision, a few key pieces of the announcement haven’t gotten as much traction. Let’s dig into those to make sure you’re able to maximize all possible benefits (or just share the news with someone in your life).
We’ll be pressing play PAY on student loans next year
First, in all the excitement (and fury) about the relief, it may have been lost on some folks that there will be one final extension to the pause on federal student loan payments. Student loan borrowers should expect that payments will be required starting January 1, 2023.
The language in the White House press release verbatim said:
“...extended one final time through December 31, 2022.”
(Well, I added the bold and italics. They weren’t so passive aggressive in the press release.)
Want some help with how to prepare for the deferment to end?
Check out this newsletter from April.
Proposal for new income-driven repayment plan
Second, there was also a proposal for a new income-driven repayment plan. It “protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans.”
Reducing monthly payments could be a major source of help for borrowers who will still have student loans after the $10,000 to $20,000 in relief (which is a lot of borrowers). If approved, this plan wouldn’t likely be enacted until sometime in 2023.
You can read more in the CNET article: New Student Loan Plan Would Cut Payments by More Than Half: How It Works
Public Service Loan Forgiveness Waiver Expires Soon
Public Service Loan Forgiveness has been around for well over a decade, but a complete mess of a program. Basically, if you work for a U.S. federal, state, local, or tribal government or not-for-profit organization for 10 years, then you could be eligible to get the remaining balance of your federal student loans forgiven.
The first wave of eligible borrowers applied for forgiveness in 2017 and it was mayhem. Almost all applications were denied. Seriously, 99 percent of people were denied.
There have been efforts to overhaul the program including a current waiver to make it more accessible to borrowers. This limited-time waiver ends October 31, 2022. If you’ve worked or currently work for a qualifying employer, then you should see if you can benefit.
Unsure if your employer qualifies for PSLF? You can use this fancy tool from the Department of Education to find out.
Here are the details on the requirements that have been updated/waived until October 31. You can find this information and more details here.
(This image is from StudentAid.gov)
The limited-time waiver to PSLF can be big for public school teachers. Under the old rules: “If you got Teacher Loan Forgiveness, the period of service that led to your eligibility cannot also count toward PSLF.” Under the new rules: “If you got Teacher Loan Forgiveness, the period of service that led to your eligibility can count toward PSLF if you certify PSLF employment for that period.”
It’s also major for folks who put in a decade of public service work, but don’t currently work for a qualifying employer.
Who is actually eligible for the $10,000 - $20,000 in relief?
Finally, let’s talk about the actual relief. Last Friday, paid subscribers received a newsletter about this breaking news, including:
Who is eligible (including details on Parent PLUS loans)
How to apply
What if I’m on an income-driven repayment plan?
Will I owe taxes?
And these two important messages:
Be wary of scams!!!
Scams always come flooding out whenever there is a new student loan announcement. You will not have to pay anyone for help with getting your loans forgiven! Be wary of anyone who calls/texts/emails claiming to be offering help with enrolling you into a program to receive forgiveness. And double check that messages from your student loan servicer are indeed from them and not a dupe. You should always go directly to your student loan servicer when in doubt.There are 10000% going to be issues with roll out
Let’s just be honest – this isn’t going to be a #flawless roll out. There are millions of borrowers and the servicers always seem to be more than happy to screw up. It will be on you to ensure that you properly apply for forgiveness and monitor that it’s going through properly. Keep monitoring for updates from the Department of Education as well as keeping tabs on your account. It never hurts to screenshot when changes occur!
I’ve unlocked this subscriber post in the interest of getting helpful information out about this process.
In addition, here are some other resources to monitor during this process.
New York Times: What You Need to Know About Biden’s Student Loan Forgiveness Plan
This article will be updated with new information, so it’s a good resource to have bookmarked.
I also recommend following journalists Ron Lieber (@ronlieber) and Tara Siegel Bernard (@tarasbernard) on Twitter because they both post updates there as well.
U.S. Department of Education: Student loan forgiveness landing page
Federal Student Aid: Managing student loans landing page