Zenith Wealth Partners

What’s Going On?: Student Loans

**** As of August 31, 2022. This will be strategically updated as new information is released 

It’s hard to remember the last time any of us were required to make a federal student loan payment. It will be just shy of 3 years on 01/01/2023 when mandated payments start again (after new legislation). 

Many of us have student loans, hear the statistics, and know the student loan crisis continues to exist. During his campaign, Biden promised to address those struggling to afford their student loan payments and provide possible forgiveness. After nearly 2.5+ years of waiting, we finally hear something!

There are headlines after headlines of people trying to interpret Biden’s recent announcement on student loan forgiveness. These are the facts we know so far:

  1. Student loan debt relief will be targeted to individuals based on income.
    • Relief up to $10,000 of student debt for all households earning less than $125,000 individually or $250,000 as a married couple. 
    • Pell Grant recipients will receive up to $20,000 in cancellation.
    • Applications will be released to apply for cancellation.
  2. Biden said the final student loan forbearance period (aka “payment pause”) will end on December, 31 2022. 
  3. A new IBR plan was introduced. Borrowers with undergraduate loans will only have to pay 5% of their income for 20 years instead of 10%.  There are additional ancillary benefits that can be explained in further detail for those eligible. 
  4. The Department of Education will publish a watch list of US schools with the poorest debt outcomes.
  5. The definition of qualifying payments for PSLF has been expanded, helping people get their loans forgiven sooner. Payments that may not have qualified in the past may now be considered.

As with any announcement of this magnitude, there is unfortunately an abundance of misleading information. Here is what we want you to remember:

  • There are still many unknowns. Do not take anything literally just yet! Always seek out more information to educate yourself.
  • If you exceed the income threshold – there is likely no benefit to you in this current legislation unless you are doing PSLF or IBR. 
  • Keep your eye out for the debt cancellation application..  Check back here periodically as we will make all forms available in updated versions of this post.
  • Seek out a professional (maybe one of us 😉) for advice. Everyone’s scenario is different and you want to make sure you are doing the best thing for you.

It’s important to acknowledge we only scratched the surface here. There are tax consequences and considerations, impacts on cash flow , and many other outcomes that may impact your personal scenario. 

In mid-September, Zenith will host a webinar dedicated to comprehensive student loan management, including relief options. Our goal is to answer all your unanswered questions!

 

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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