I promised to keep you all informed as new information about student loans became available, so here is a much-needed update following last weeks announcement:
- $10,000 of forgiveness is being granted for those who earn less than $125,000
- Graduate loans do count for this (most people did not think they would)
- That is for singles and rumor has it that the number is $250,000 for families
- This is based on either 2020 or 2021 tax returns, not 2022!
- Up to $20,000 of forgiveness for Pell grant recipients
- The max forgiveness is $20,000. It is not $20,000 for Pell Grants and then also $10,000 for regular.
- Forbearance will also be extended one more time through the rest of this calendar year (who knows though, they have said that every time, but I would guess this is the last time with all the reform that came).
- There will be no interest accrual on loans in repayment
- Meaning if you are paying the required payment and it is not enough to cover this interest, you your loans will not grow past that starting balance.
- A new income-driven repayment plan that caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income
- Loan balances will be forgiven after 10 years of payments, instead of 20 years, for borrowers with original loan balances of $12,000 or less
People keep reaching out and asking me what needs to be done to receive this forgiveness. Here’s what you need to do, go follow this link and fill it out so you can ensure they have your info on student loans.
Then… That is it! Once this is all finalized (as long as it goes through), forgiveness will be given. This all applies to anyone who took out federal loans prior to July 1, 2022.
Please be smart with this forgiveness and use this extra savings to benefit your future! Do not just go spend it.
Disclaimer: none of this is advice, it is just for informational purposes. Talk with your financial planner before implementing any of these strategies.