Date Posted: 
Monday, August 29, 2022

The Biden-Harris Administration and the U.S. Department of Education (DOE) have created a three-part plan to help federal student loan borrowers transition back into regular repayment schedules and prevent unnecessary delinquencies or defaults.

Part 1: Extension of student loan repayment pause

The repayment pause has been extended a final time through December 31, 2022.

Payments will resume in January 2023. As the repayment pause extends automatically, borrowers do not need to take any additional action.

Part 2: Targeted debt relief to low- and middle-income families

The DOE will provide up to $20,000 in debt cancellation to some borrowers who meet certain requirements. In order to be eligible, the borrower’s annual income must be below $125,000 (for individuals) or $250,000 (for married couples or head of households).

The amount canceled will depend on whether the borrower received a Pell Grant in college. Pell Grants are usually awarded only to undergraduate students who display exceptional financial need. Individuals who meet the annual income requirements will have the following amounts forgiven (capped at the amount of the borrower’s outstanding debt):

  • Up to $20,000 for borrowers who received a Pell Grant in college
  • Up to $10,000 for borrowers who did not receive a Pell Grant in college

Many borrowers will be able to have their relief automatically applied because relevant income data is already available to the DOE. If you aren’t sure if the DOE has your income data, a simple application will be launched before December 31, 2022. 

Part 3: New proposed income driven repayment plan to make repayment more manageable for low- and middle-income families

The Biden-Harris Administration is proposing a rule to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers. The rule proposes to:

  • Lower the amount borrowers pay monthly by calculating the payment based on 5% of the borrower’s discretionary income (instead of 10%) for undergraduate loans.
  • Raise the amount of income that is considered non-discretionary income, and guarantee that no borrower under 224% of the federal poverty level will have to make a monthly payment.
  • Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
  • Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments.

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