You may have heard by now that President Joe Biden announced his long-anticipated plan to cancel some student loan debt for eligible American borrowers after months of anticipation and pressure. Considering that 45.5 Million Americans currently carry federal student loan debt, this plan will have big implications for many.
Following months of back and forth deliberations in the White House, the President announced that $10,000 of federal student loan debt will be forgiven for individual borrowers earning less than $125,000 a year or households earning less than $250,000 a year.
To further assist borrowers with low-income backgrounds, an additional $10,000 of debt forgiveness will be awarded to those who received Pell grants during their time in school (about a third of undergraduate federal student loan borrowers receive Pell Grants every year).*
The administration has also officially extended its moratorium on federal student loan repayments, which originally began in March 2020 at the onset of Covid-19. While payments were meant to restart on September 1, they’re now set to begin on January 1, 2023.
Millions of Americans will be directly affected by this recent announcement, and I know that many of you will feel the impact directly in your own extended families.
With the moratorium extended until 2023, borrowers have more time to prepare their budget for student loan repayments. Since we’re approaching almost three years of payment pauses, it’s likely adjustments will need to be made to accommodate this forthcoming financial obligation.
More specific information about these announcements will be coming – and we’ll be sure to keep you updated once we know more. In the meantime, if you have any questions about this or anything else, please don’t hesitate to reach out. Together, we can prepare and adjust your financial strategy accordingly.
*This update is for informational purposes only and is not a replacement for real-life advice. Make sure to consult your tax or accounting professional before modifying your tax strategy to account for the $10,000 federal student loan forgiveness program.
How will the student loan debt forgiveness plan impact you?
August 24, 2022