Things you need to know about President Joe Biden's New Student debt forgiveness plan.
In this article, we will explain What is President Joe Biden's announcement regarding the student loan debt forgiveness plan? Who are eligible for this plan? How much debt is forgiven?, How can you avail the benefits of this plan? and all the other questions that you have in your mind about this announcement.
So, keep reading and without any delay let's start....
On Wednesday 24th Aug, President Joe Biden announced his plan regarding student loan debt which includes forgiveness or reduction for some borrowers and extending payment pause which is related to the COVID-19 pandemic.
President Biden announced to forgive up to $20,000 of federal student loans for those who have Pell Grant, and a sum of up to $10,000 for other qualifying borrowers. He also extended the federal student loan payment which was paused due to the pandemic through Dec. 31.
This plan was warmly welcomed by many citizens but it also attracted some sort of criticism.
Many people were wondering about the forgiveness amount of $50,000, some even expected all their debts will be forgiven or cleared.
What’s Biden’s Student Loan Forgiveness Plan?
Those individuals who have an annual income of $125,000 per year or under $250,000 per year for household heads or married couples are eligible to get up to a $10,000 reduction in their federal student loan. In this plan, no private loans will be forgiven.
Those individuals who have received a Pell Grant in their institution will be eligible for up to a $20,000 reduction on their loans.
How to apply in Student Loan Debt Relief Program?
Borrowers can submit their applications, but it will not be processed until this month. The student loan forgiveness application is currently in beta testing mode and the agency will pause the site for maintenance.
What the heck is Pell Grant?
Pell Grant has been awarded across America since 1973 only to students.
It’s a need-based aid or fund that is usually awarded to undergraduate students who demonstrate exceptional financial need.
The amount availed by students is need-based and varies on factors like tuition fees and student’s family contribution.
The current maximum amount granted to students is $6,895 per academic year.
The best thing about Pell Grant is that they do not to repaid by the students - unlike loans.
How to apply for Pell Grant?
This process is simple, to apply for Pell Grant, you are required to submit a correct Application for Federal Student Aid (FAFSA) form.
This form is used by colleges to check the eligibility for the grant and how much amount you can and or are expected to receive.
To maintain eligibility for Pell Grant, you will have to submit a FAFSA form each year you attend school, according to Federal Student Aid.
The day you finish your enrollment at the undergraduate college, you will no longer be eligible for the Grant.
Who qualifies for debt forgiveness?
This plan applies to all Federal Student loan borrowers.
Or you can say Individuals who have taken federal student loans who make under $125,000 per year, or couples earning less than $250,000 per year, are qualified for up to $10,000 in forgiveness.
How to claim student loan debt forgiveness, Do I have to apply?
As a student, be aware of any news regarding this forgiveness but now you have to sit tight because the borrowers are excited about the news, so they want to know what comes next.
White House said that, to avail of benefits, students will have to submit an application to verify their income but the applications are expected to be available no later than Dec. 31st, 2022.
It’s expected that about 8 million borrowers will be automatically entitled to receive this relief by the US government because the Department of Education already has the income information on file.
Is debt forgiveness taxable?
The White House said This debt relief will not be counted as taxable income for federal income tax purposes.
If you don’t qualify for loan forgiveness, what should you do?
“If you haven’t made a student loan payment since the pause began, it’s important to understand how much you’ll owe each month,” Daniel Milan, advisor at Cornerstone Financial Services, said.
You are supposed to review the interest rates on your loan and start paying off the highest interest ones first, he also recommends enrolling in autopay so you don’t miss any payments and get back into the habit of paying the interest regularly and also consider refinancing if it lowers your payments.
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