What’s happening with federal student loan forgiveness?
If you or a family member have federal student loans, you may be wondering about the status of the most recent payment pause and the Student Debt Relief Plan announced by the White House in August of 2022. Below are some key things to know to help you stay informed.
What’s the current status of federal student loan forgiveness?
Here’s the most recent information to date:
- The Student Debt Relief Plan would cancel up to $10,000 in federal student debt (up to $20,000 for Pell Grant recipients) for borrowers making under $125,000 a year, or under $250,000 for a married couple.
- Due to legal challenges, the Supreme Court is scheduled to hear arguments about the forgiveness plan beginning in February 2023 and will decide if it can move forward.
- The student loan payment pause that began in March 2020 has been extended temporarily until June 30, 2023. Student loan payments are expected to resume 60 days after that deadline, or 60 days after the forgiveness program is permitted to move forward, whichever comes first.
- The application for student loan debt relief that opened in October 2022 was temporarily blocked on November 11, 2022, so applications are not being accepted at this time.
What can borrowers do as they wait for an announcement or a resolution?
While there’s nothing that you need to do now, you can take steps to prepare financially as you wait for a decision on the Student Debt Relief Plan.
- If you’ve already applied for relief and your application has been approved, there is nothing you need to do and there is no need to reapply. Eligible borrowers who haven’t applied can sign up for alerts and updates.
- Start preparing now for payments to resume in the summer of 2023. Review your budget and look for areas where you can cut expenses and increase savings. Focus on paying down other debts to help free up funds to put toward student loan payments.
- Check your eligibility for other government loan forgiveness programs like Public Service Loan Forgiveness, Teacher Loan Forgiveness and even income-driven repayment plans that may reduce your monthly payment.
- Make sure your current student loan servicer has your correct contact information so they can reach you. Check your loan servicer’s website frequently for any updates or announcements and for help identifying your loan servicer.
- Consider paying down your student loans before repayments start and while these federal loan interest rates are at 0%, especially if your balance is higher than the proposed forgiveness amount.
- Debt that is forgiven may be considered taxable income. Look for ways to lower your tax liability — for instance, by maximizing contributions to your retirement plans or health savings accounts.
- Stay up to date on the latest Student Debt Relief Plan news, visit the U.S. Department of Education’s Federal Student Aid website as well as your loan servicer website.
- If you need help with budgeting, financial planning or want to learn about Commerce Bank student loan options, contact us. We’re here to help.