Whether or not you agree with loan forgiveness, this affects everyone. Not only the 43 million Americans who currently have these loans but all taxpayers because this legislation will cost $300 billion in the first year alone. Here's what we know:
- Private loans are not eligible.
- The current payment freeze will extend to December 31, 2022.
- Current student loans will receive up to $20,000 of loan forgiveness.
- Graduate school loans are also eligible for up to $10,000 in debt forgiveness if they are federally subsidized (Grad PLUS Program)- according to a senior administrator on a call to a reporter.
The details
President Biden stated on August 24th, that Americans will have up to $10,000 in federal student loan debt forgiven. That amount increases to $20,000 if they received a Pell grant. A Pell grant is a need-based grant. The less money your parents earned, the better chance you received this.
To check if you received a Pell grant, visit: https://studentaid.gov/. This is a government website where you applied for FAFSA. There’s a possibility your parents made an account and you’ll have to get the username and password from them. Once logged in, go to the aid summary page and you should see if you received a Pell Grant.
What do I need to do?
It won't be automatic. You will have to apply, the details will be announced in the coming weeks. Check the federal student aid website for upcoming details.
Other announcements:
President Biden plans to include other provisions. He wants to overhaul the public service program to make it easier for public service workers to get their debt forgiven.
A massive change gives undergraduate loans a cap of 5% of monthly income on the income-driven plan and eliminates the loan completely after 20 years of repayments.
Remember that this is not set in stone. The timetable or likelihood is uncertain because this has never been done before.
About the Author
Noah Schwab CFP® is a financial planner in Spokane, Washington who specializes in helping small business owners with retirement plans and personal finances.
