Can You Still Qualify for Student Loan Relief?

Can You Still Qualify for Student Loan Relief?

Student loan forgiveness has become a contentious issue. Although there is no compensation for those who have already fulfilled their financial obligations, millions are struggling to pay off their debt decades after graduation. Student debt is crippling an entire generation of young adults and is making it difficult to build wealth. Therefore, the Biden administration has announced its plan for student loan relief to reinvigorate the economy and support those who are struggling to get out of debt.

 

What Is Biden’s Student Loan Relief Program?

In August, President Biden announced his plan to lift some financial burdens for working families. The student loan relief program aims to alleviate some of the current economic strains people are under in the wake of Covid-19. His latest announcement builds on the deferred repayment that is already in place. While Biden has extended the pause on student loan repayments through December 2022, the administration has also created a way for partial loan forgiveness.

 

Who Qualifies?

Thousands of borrowers welcomed the news and are taking advantage to reduce their student loan debt. Anyone holding a federal student loan can receive debt cancellation for up to $10,000. However, the amount increases to $20,000 for Pell Grant recipients. You are eligible for the program if:

    • your income is less than $125,000 as an individual or $250,000 for married couples.
    • your household is not in the top 5% of national incomes.
    • you call to enroll in the program.

 

What Are the Benefits?

During his public address, Biden stated that this program would give relief to 43 million Americans and cancel the student loan debt completely for about 20 million people. The goal is to help the people who need it the most, with 90% of funds going to those who earn less than $75,000.

 

In addition to reducing the balance, the program will also create smaller, more manageable payments. The monthly repayment amount for undergraduate loans will decrease to 5%. And, anyone making less than 225% of the federal poverty level will not have to make monthly payments. Once you enroll, it covers the unpaid monthly interest so your balance won’t grow either. Furthermore, they will forgive the remaining balance after 10 years of repayment. But the best part is that the relief will not be counted as taxable income on your tax return.

 

Why Do People Need It?

Since 1980, the cost of attending a four-year university has nearly tripled for both public and private schools. Sadly, federal support has been unable to keep up with the rising costs. While Pell grants once covered 80% of expenses for students from low and moderate-income families, it now only covers a third of the total cost. Students in this situation have no other choice but to take loans if they want to graduate with a degree.

 

Based on statistics from the Department of Education, the average undergrad now leaves school with $25,000 in student debt. On a national scale, student loan debt accounts for $1.6 trillion from over 45 million Americans. And, this has impacts on the economy when people struggle to pay ballooning balances or build wealth to buy a home, start a business, or save for retirement. What’s worse is that some people with student debt never even got their degrees because the cost to attend and finish was too high.

 

Can You Still Qualify for the Student Loan Relief?

If you had privately held federal loans, you could qualify for relief by consolidating your debt with the Direct Loan program. However, some people are receiving information that they only have until September 29.

 

This has been very confusing, but it’s important to know to who the deadline applies. While those with government-held loans are still eligible, there will be some restrictions for certain types of private loans that were backed by the federal government. After this date, debtors with a Perkins loan or Federal Family Education Loan (FFEL) will no longer qualify.

 

What Other Programs Offer Student Loan Relief?

Even if you didn’t take advantage of the recent reductions, other programs may cancel or reduce your student loans. In circumstances of death, permanent/total disability, school closure, or bankruptcy, the government may cancel the full balance. Some programs cover your tuition if you are willing to offer services post-graduation in certain fields and agencies.

 

College Cost Reduction and Access Act of 2007

The goal of this legislation was to make higher education more affordable for low and middle-income families with increases in government grants. It also set lower interest rates on any government-backed loans. And as mentioned above, it also allows for cancellation of the loans in certain situations.

 

Public Service Loan Forgiveness

Employees who work for government or not-for-profit organizations may be eligible for loan forgiveness. While the requirements for the PSLF Program are notoriously confusing, many people should qualify for the aid. If you have successfully made 120 qualifying payments under an eligible repayment plan and work full-time for a qualifying employer, contact your financial advisor to see if you can take advantage of the program.

 

Teacher Loan Forgiveness

The government also offers loan forgiveness for teachers. Those who have taught full-time for 5 consecutive years in a low-income school (elementary or secondary) or an educational service agency could be eligible for up to $17,500 in loan forgiveness.

 

National Health Service Corps

Programs are also available for medical professionals who qualify for loan forgiveness through the National Health Service Corps.

 

Nurse Corps Loan Repayment Programs

With widespread staffing shortages, Registered Nurses can also receive assistance to repay loans in exchange for their services after graduation. The program is administered through the Department of Health and Human Services. And, nurses must work in critical shortage facilities to qualify for aid.

 

What Does Future Relief Look Like?

The student debt loan relief program is a small step towards lifting the financial burden of education. There are also policy changes and reforms that must be addressed.

 

For example, many people who are entitled to relief under the programs never received aid because of complex restrictions on eligibility, failure to implement it, and poor financial counseling. To help counteract this problem, the government is employing changes to the PSLF program to create an easier path for borrowers. Furthermore, Biden has also increased funding for Pell Grants to over $40 billion. However, this still won’t reach his ultimate goal of providing free tertiary education through community colleges.

 

The Department of Education has also suggested regulatory changes to make the programs more effective and qualify more types of payments. And, other advisors are also voicing the need for more accountability on creditors. If the agencies had more resources and authority, they would be able to go after schools that have contributed to the student debt crisis with for-profit scandals and predatory lending practices.

 

There are no guarantees that there will be more financial relief down the road, especially under a new administration. However, there is at least some hope for those who need support for the immediate future.

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Posted in: Debt, Education

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