Zenith Wealth Partners

What’s Going On?: Student Loans

**** As of May 23, 2023.  This will be strategically updated as new information is released.

Many of us have student loans, and yet the media has stopped discussing the student loan crisis in this country. The  information on Biden’s plan for student loan forgiveness has changed so much since he’s been elected as president. Many of us have completed the student loan forgiveness application that was rolled out in October of last year, but all of those applications are currently in limbo. There have been so many headlines, but little information, as most of us are waiting in limbo for the Supreme Court’s decision. Here is what we do know:

  • Supreme Court case will have a response by the end of June and payments will begin 60 days after their ruling (first payment due date will be in September)
  • Biden has proposed changes to already existing payment plans – such as decreasing the percentage of income considered for income driven plans
  • There has been relief for groups such as borrowers with a disability, borrowers who have been defrauded by their school, and more PSLF borrowers
    • Those who qualify for PSLF now have payments that will qualify that were not considered in the past.

It’s important to acknowledge that even if we receive this long anticipated forgiveness, there will still be tax consequences and other unforeseen changes to our cash flow. Whether or not we receive student loan forgiveness, there will not be another pause and we all must prepare for payments to resume.

**** 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.

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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