With the recent passage of the Student Debt Relief Plan, we thought it would be good to cover some highlights of the Debt Relief Plan, as well as the Public Service Loan Forgiveness Program which our members may be eligible for.
Debt Relief Plan
There will be a final extension of the pause on student loan repayment, interest, and collections through December 31, 2022. Borrowers should plan to resume payments in January 2023.
Borrowers with annual income during the pandemic of under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) who received a Pell Grant in college will be eligible for up to $20,000 in debt cancellation. Borrowers who met those income standards but did not receive a Pell Grant will be eligible for up to $10,000 in relief. The Education Department will be announcing further details on how borrowers can claim this relief in the weeks ahead. Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the Department.
The Education Department is also proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers. The proposed rule would protect more income from loan payments. It would cut in half—from 10% to 5% of discretionary income—the amount that borrowers have to pay each month on their undergraduate loans, while borrowers with both undergraduate and graduate loans will pay a weighted average rate.
The Department is announcing new steps to take action against colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country and requesting institutional improvement plans from colleges with the most concerning debt outcomes that outline how the college intends to bring down debt levels.
More details will be rolling out in the coming days and weeks. Borrowers do not need to take action today to access relief. Borrowers will likely need to submit an application to verify their income. You can read more in the press release. Answers to frequently asked questions can be found at: https://studentaid.gov/debt-relief-announcement/
Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness (PSLF) offers loan forgiveness to those who work in public service including the military, qualifying non-profits, or federal, state, local, or tribal governments. After 10 years of public service employment and on-time payments, you can have your entire balance forgiven.
The U.S. Department of Education has instituted temporary changes that provide more flexibility and make it easier than ever to have your debt forgiven under the PSLF. This includes allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF.
However, these temporary changes end on October 31, 2022. Michiganders who work in public service should apply at: studentaid.gov/pslf/.