Will President Biden’s Student Loan Debt Relief plan affect your financial planning as a graduate student?
At a recent grad town hall, Dr. Brian Bolton, Professor of Finance, and Dr. Philip de Mahy, Assistant Dean of the Graduate School, discussed key aspects of the student loan forgiveness initiative and what it means for grad students. Here are a few key takeaways on how the plan may inform your financial decisions.
Review the Policy
Many federal student loan borrowers, including graduate students, can receive debt relief under the plan proposed on August 24, 2022. The proposal provides for up to $20,000 in debt relief for Pell Grant recipients and up to $10,000 for other borrowers.
The criteria to be eligible includes having an income under $125,000 for individuals and $250,000 for married couples filing jointly or heads of households in 2020 or 2021.
Please visit the Federal Student Aid website for the latest information about which loans are eligible and other considerations.
Keep in mind that you won’t be able to receive federal student loan debt relief if your loans were obtained from a private lender, you refinanced your federal loan into a private loan, or you consolidated or combined federal loans and private loans into a single loan repayment package.
Be Ready to Apply
An application form will become available online in early October. The Department of Education has loan balance and grant history information, but it doesn’t hurt to pull out your records to ensure all the information on file is accurate.
While some people will receive forgiveness automatically without filing, be prepared to submit your application as soon as you can. The filing deadline is December 31, 2022.
Remember that student loan payments, which have been paused since March 2020, will restart after December 31, 2022 for most loans. Check with your servicer to confirm if you will have payments due in January 2023, and if interest will begin accruing at that time.
By applying for loan forgiveness as soon as possible, you can aim to bring your balance down before interest begins accruing again.
If you’ve made payments and reduced your outstanding loan balance since March 2020, you may be eligible to receive a refund. Contact your servicer to confirm eligibility.
Be aware that the student loan forgiveness plan has already caught the attention of scammers. Remember that no one should call you to gather any personal information or claim to fast-track your application. You should also not have to pay any fees for your application to be submitted or processed.
Whether or not you are currently repaying student loans as a graduate student, there are a few programs you should know about to help inform your financial planning going forward.
Public Service Loan Forgiveness
Borrowers employed by nonprofits, the military, or federal, state, tribal, or local governments may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. Temporary changes in place through October 31, 2022 provide flexibility to make it easier to receive forgiveness by allowing credit for past periods of repayment that would not otherwise qualify for PSLF.
Income Driven Repayment
For those pursuing income driven repayment on undergraduate student loans, there is a proposal to cap the required income-based repayments at 5% of your discretionary monthly income (down from 10%). Keep this option in mind when it’s time to repay your student loans.
Looking for more information about financial planning in graduate school? Check out some of our top personal finance tips for grad students.