5 Things To Know About The Student Debt Relief Program
As you likely have heard, on August 24th, the Biden Administration announced a three-part student loan debt relief program. The aim of the program is to help working and middle-class federal student loan borrower’s transition back to regular payments as pandemic-related support expires.
Here are 5 key points to know about the student debt relief program.
- Borrowers are eligible for this relief only if their individual income is less than $125,000 or $250,000 for married couples. No high-income individual or high-income household in the top 5% of incomes will benefit from this action and the Education Department estimates that 90% of the debt cancellation benefits will go to individuals who earn less than $75,000.
- The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education.
- Borrowers who meet the income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief.
- To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.
- Under the American Rescue Plan, this debt relief will not be treated as taxable income for Federal income tax purposes.
Additional provisions of the plan are meant to make the student loan system more manageable for current and future borrowers, including a revised plan for what is known as income-driven repayment (IDR). The IDR plan will cut the amount borrowers have to contribute each month – from 10% of their discretionary income to 5%.
For more information on the Student Debt Relief Program, you can read the Fact Sheet provided by the White House.
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