Yesterday (Aug 24, 2022), a Student Loan relief plan was announced that is estimated to apply to 8 million people in the US. My wife still has some student that may be eligible. My initial impression is that we (and millions of others) need to ask ourselves the following questions:
- How do I determine if any of our student loans are eligible?
- How do I determine if we are eligible?
- If 1 and 2 are met, how do we receive the relief?
Question 1 is pretty straight forward, since only federal student loans are eligible. So how do we determine if any of our loans are federal loans?
Question 2 is mostly answered but lacks a few details:
Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples)
- What is the definition of "income"? For example, is it before or after Traditional 401k and/or IRA contributions, or the standard deduction? Is it AGI? (Perhaps specifying the line number of a tax return that should be used would be simplest.)
- From what I can tell so far the income is determined by your income in 2020 and/or 2021. If we were under the limit one year but over another year are we still eligible?
If we end up being eligible, as a non Pell Grant recipient, it appears we could receive up to $10k:
Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief.
In our case my wife has more than $10k total remaining debt, but it is split up in multiple banks, each of which is less than $10k.
Once eligibility is determined, what is the process for receiving the debt cancellation?
My current assumption is that what matters is the total loan amount you have across all student loans, instead of the amount per bank. If that's correct then I don't think this will apply to us specifically, but I believe it will be helpful to others, so hypothetically:
- If you are eligible and your total debt is less than the maximum forgivable amount, would it be wise to immediately stop making payments?