Biden-Harris Student Debt Relief Plan 2022
With the expiration of pandemic-related support approaching, this three-part plan aims to help working and middle-class federal student loan borrowers.
Part 1 of the plan is a final extension of the student loan repayment pause. The pause will be extended through December 31, 2022, with payments resuming on January 1, 2023. The extended pause occurs automatically, meaning borrowers do not need to do anything.
Part 2 provides targeted debt relief to low- and middle-income families and proposes long-term changes to the Public Service Loan Forgiveness program. This includes up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients. This relief is capped at the amount of your outstanding debt.
The President is also seeking to increase the size of Pell Grants and further reduce the cost of college. Eligibility consists of individuals with incomes less than $125,000 or households with incomes less than $250,000.
To make it easier for borrowers working in public service to gain loan forgiveness, new PSLF changes have been addressed. Borrowers employed by non-profits, the military, federal, state, Tribal, or local government may be eligible to have all their student loans forgiven through the PSLF program. The existing temporary eligibility criteria being waived will expire on October 31, 2022. For those interested in applying to the program, a simple application for PSLF will be launched in the coming weeks.
Part 3 focuses on making the student loan system more manageable for current and future borrowers. To do so, the administration has proposed a rule to create a new Income-Driven Repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers.
The proposed rule would require borrowers to pay no more than 5% of their discretionary monthly income on undergraduate loans. This is down from the 10% available under the most recent Income-Driven Repayment plan. Additionally, the rule raises the amount of income that is considered non-discretionary and is protected from repayment. Along with this, no borrower earning under 225% of the federal poverty level will have to make a monthly payment.
It would also forgive loan balances after 10 years of payments instead of 20 years for borrowers with loan balances of $12,000 or less and will cover the borrower’s unpaid monthly interest. The plan simplifies the choices of loan repayment options for borrowers. The proposed regulations will be published on the Federal Register for public comment in the coming days.
For questions or guidance, reach out to an expert today to get on the path to debt forgiveness.