42.8 million borrowers have federal student loan debt, and now those borrowers can apply to have up to $20,000 wiped out. Plus, the application takes less than 5 minutes of your time.
Since 1980, the cost of attending college has nearly tripled (after including inflation). Many working families have no choice but to borrow if they want to get a degree. According to the Department of Education, most undergraduate students are graduating with almost $25,000 in debt. This debt makes it harder for middle-class borrowers to buy a house, or even put money away for retirement.
“The U.S. Department of Education will provide up to $20,000 in debt relief to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt relief to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for households.”
Borrowers who are employed by non-profits; federal, state, tribal, or local governments; or the military may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program.
Most borrowers who apply can expect relief within 6 weeks. The Department of Education encourages everyone who is eligible to file the application by mid-November in order to receive relief before the payment pause expires on December 31, 2022. The Department of Education will process applications as they are received.
The Biden administration has confirmed that student loan forgiveness will not be taxable at the federal level for borrowers. According to the American Rescue Plan, there is a provision that exempts all federal student loan forgiveness from taxation through the end of 2025. While forgiveness is exempted at the federal level, it does not exempt at the state level.
Governor Whitmer announced that student loan relief would not be treated as taxable income in Michigan. Indiana, Mississippi, and North Carolina have announced that the student loan relief will be taxable. Please visit your state website for more information.
The Department of Education has urged borrowers to become aware of scams. “You may be contacted by a company saying they will help you get loan discharge, forgiveness, cancellation, or debt relief for a fee. You never have to pay for help with your federal student aid. Make sure you work only with ED and our loan servicers, and never reveal your personal information or account password to anyone”
Scam attempts need to be reported to the Federal Trade Commission by calling 1.877.382.4357 or by visiting their website; reportfraud.ftc.gov
Federal Student Aid. (n.d.). The Biden-Harris Administration's Student Debt Relief Plan Explained. Federal Student Aid. Retrieved October 31, 2022, from https://studentaid.gov/debt-relief-announcement