If you are one of the millions of Americans with college debt, you may be wondering how the new student loan forgiveness plan announced by the Biden-Harris Administration will affect you. This article will provide an overview of the plan, what it could mean for you, and how we at Halter CPA can help.
The new repayment plan will offer borrowers with lower and middle incomes substantial relief by capping monthly payments at 5% of discretionary income (down from 10%) and forgiving loan balances after 10 years of payments (instead of 20). In addition, the amount of income that is considered non-discretionary will be raised so that no borrower earning under 225% of the federal poverty level will have to make a monthly payment.
For borrowers with loan balances of $12,000 or less, the balances will be forgiven after 10 years of payments. This is a great relief for those struggling to repay their loans and will enable them to get out of debt sooner and focus on other financial goals.
The new plan will not only cover the borrower’s unpaid monthly interest, but also any unpaid loans from previous months. This way, unlike with other income-driven repayment plans, the borrower’s loan balance will not grow as long as they make their monthly payments, regardless of how low their income is.
What does this mean for you as a student or parent with a student loan? If you are currently enrolled in college, this new plan could offer significant relief when repaying your loans after graduation. If you are already struggling to repay your loans, the new plan could help you get out of debt sooner.
A key part of the new plan is increasing the amount of income that is considered non-discretionary. This means that more of your income will be protected from repayment, which will help keep your monthly payments affordable.
At Joan W. Halter, CPA, we can help you understand how the new student loan forgiveness plan will affect you and your finances. We can also help you take advantage of the new plan to get the most relief possible. For example, if you are currently enrolled in an income-driven repayment plan, we can help you switch to the new plan so that you can get the most benefit. Or, if you are struggling to make your monthly payments, we can help you negotiate a lower monthly payment with your lender.
No matter what your situation is, we can help you navigate the new student loan forgiveness plan and get the relief you need. Contact us today to learn more.