The Biden administration announced it will begin discharging federal student loans for 804,000 eligible borrowers to the tune of $39 billion. The move stems from a failure in the federal student loans program to account for qualified payments toward student loan forgiveness while borrowers were enrolled in income-driven repayment (IDR) plans. The agency will now count periods of forbearance and deferments toward the loan forgiveness threshold, as well as partial and late payments.
With IDR plans, borrowers may receive a lower monthly payment based on their income and family size. Additionally, borrowers in the plan can qualify for forgiveness after 20 or 25 years of qualifying payments depending on loan type.
Why This Matters:
The relief is welcome news to borrowers who weren’t properly credited for payments under their income-driven repayment plan, affecting their eligibility for student loan forgiveness. Despite the Supreme Court’s rejection of the Biden administration’s general student loan forgiveness plan, the administration continues to pursue other avenues to provide relief to student loan borrowers. The Biden administration has now approved student debt relief totaling $116.6 billion for more than 3.4 million student loan borrowers.
Steps You Can Take:
• Learn how income-driven repayment plans can lower your student loan payments.
• Read how the Public Service Loan Forgiveness (PSLF) program works.
· Research three federal student loan forgiveness programs currently available.
• Learn how to protect yourself against student loan forgiveness scams.
Student Loan Interest Began Accruing September 1
Student loan borrowers are bracing for COVID-19 relief to come to a close. Interest on student loans began accruing on September 1, with payments returning in October. The Department of Education (DOE) plans to communicate with borrowers before their first payment is due.
In late June, the Biden administration announced the rollout of a 12-month on-ramp repayment program beginning October 1. During the on-ramp period, the DOE won’t consider missed or late payments delinquent.
Why This Matters:
Restarting payments may cause financial hardship for some borrowers, especially those who previously struggled to make their monthly student loan payments before the pandemic. The 12-month on-ramp period will help borrowers get back on track while avoiding delinquencies and defaults.
Borrowers should begin making room for student loan payments in their budgets. If resuming payments will lead to financial distress, consider enrolling in programs you’re eligible for to make them more manageable, such as income-driven repayment plans, federal loan consolidation and forbearance deferment options.
Steps You Can Take:
• Prepare for student loan payments to resume.
• Review seven options if you can’t repay your student loans.
• Read about the average monthly student loan payment.
• Learn how to extend your student loan payment pause through deferment or forbearance.
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Securities and investment advisory services offered through Woodbury Financial Services, Inc. (WFS) member FINRA/SIPC. WFS is separately owned and other entities and/or marketing names, products or services referenced here are independent of WFS. Insurance services offered through Atled Financial Group 3801 Ridge Road. Highland, IN. 46322.
