After months of discussions, President Biden announced on 24-August-2022 a plan to significantly reduce student loan debt. The plan includes canceling up to $10,000 of student debt for borrowers who earn less than $125,000 a year (or families earning less than $250,000). The plan also allows for canceling up to $20,000 of debt for low- and middle-income borrowers who previously received a Pell Grant.
Additionally, Biden expressed the plan to extend the freeze on monthly payments and interest for a “final time” through 31-December-2022. Biden stressed the importance for student loan payments to resume by the start of January 2023. The moratorium on student loan payments has been in effect since the start of the pandemic in March 2020.
Currently in the United States, over 45 million people owe $1.6 trillion for student loans. This plan is expected to reduce the total debt by around $300 billion.
The timing of the debt relief is not yet clear, and the Department of Education said there would be an application process by the end of the year. Forgiveness will not be automatic, and borrowers will need to apply to be eligible. We will continue to monitor this and any clients with student loans should certainly reach out to us closer to the end of 2022 and we can advise accordingly.