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Your Guide to Biden's Student Loan Debt Forgiveness: Who's Eligible?
On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Advisor Patrice Bening to discuss recent changes to student loan repayment plans. It is important to note these changes impact federal student loans, not private loans. The Department of Education started notifying eligible borrowers (those who have been on repayment plans for 20-25 years of qualifying months) on Friday, July 14. The Department of Education will continue to notify eligible borrowers who have reached the forgiveness threshold every two months.
Income driven repayment plans previously had four options: income based, income-contingent, pay as you earn, and revised pay as you earn. The revised pay as you earn option is now replaced by the SAVE plan. Under SAVE, payments will be reduced from 10% to 5% of discretionary income. The discretionary income threshold will also increase to 225% of the poverty line (it was 150% before), so for borrowers making $32,800 or less (or $67,500 in a family of four), monthly payments will be reduced to $0. Furthermore, those with balances of up to $12,000 can reach total forgiveness after 10 years of payments.
Patrice and Chris also highlight that remaining interest for both subsidized and unsubsidized loans will be eliminated after a scheduled payment is made under the SAVE plan. This means that when a borrower’s monthly payment is less than the new interest that accrues, the excess interest will be waived. The SAVE plan also excludes spousal income for borrowers who are married and file separately. Moreover, when one consolidates loans, they will not lose time towards their forgiveness, and payments made before 2024 will count towards time to forgiveness.
Finally, Patrice and Chris encourage listeners to consult with experts and financial planners before making decisions on consolidation and repayment plans.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.
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By Chris GaleskiOn today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Advisor Patrice Bening to discuss recent changes to student loan repayment plans. It is important to note these changes impact federal student loans, not private loans. The Department of Education started notifying eligible borrowers (those who have been on repayment plans for 20-25 years of qualifying months) on Friday, July 14. The Department of Education will continue to notify eligible borrowers who have reached the forgiveness threshold every two months.
Income driven repayment plans previously had four options: income based, income-contingent, pay as you earn, and revised pay as you earn. The revised pay as you earn option is now replaced by the SAVE plan. Under SAVE, payments will be reduced from 10% to 5% of discretionary income. The discretionary income threshold will also increase to 225% of the poverty line (it was 150% before), so for borrowers making $32,800 or less (or $67,500 in a family of four), monthly payments will be reduced to $0. Furthermore, those with balances of up to $12,000 can reach total forgiveness after 10 years of payments.
Patrice and Chris also highlight that remaining interest for both subsidized and unsubsidized loans will be eliminated after a scheduled payment is made under the SAVE plan. This means that when a borrower’s monthly payment is less than the new interest that accrues, the excess interest will be waived. The SAVE plan also excludes spousal income for borrowers who are married and file separately. Moreover, when one consolidates loans, they will not lose time towards their forgiveness, and payments made before 2024 will count towards time to forgiveness.
Finally, Patrice and Chris encourage listeners to consult with experts and financial planners before making decisions on consolidation and repayment plans.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.