President Joe Biden’s student forgiveness plan to forgive up to $20,000 for borrowers who earn less than $125,000 per year could alleviate the burden of debt for millions of people. In January, the Biden Administration released updates that would pause payments completely for some people while reducing monthly payments for others.
These changes included:
- Monthly payments would be reduced to 5% (down from 10%) of discretionary income, which is the income leftover after you’ve paid for basic necessities, including household bills, daily expenses, and taxes.
- Low-income borrowers would pay nothing.
- Interest accumulations while making regular payments would end.
- Qualified borrowers would be eligible for complete student loan forgiveness after paying 20 years of monthly payments for undergraduate loans and 25 years for graduate school loans.
- Borrowers who are 75 days behind on payments would be automatically enrolled in an income-driven repayment plan offering the lowest monthly payment.
Lawsuits contesting the legality of President Biden’s forgiveness program have brought it to a current halt, with the Supreme Court set to make deliberations on it in late February. Student loan payments and interest have been suspended since March 2020, but they are scheduled to resume in June. While the forgiveness program is up in the air, getting prepared financially provides safeguards for when payments resume.
Get prepared with these 3 tips:
- Start by making sure your budget is in a good place. Once you have all your monthly bills and take-home outlined, add in what you would pay toward your student loan payment each month.
- Now that you’ve budgeted for your student loans, begin setting aside extra savings in a separate account. This way, you’ll have safeguards in place if you have a bad month.
- If the prospect of paying off your student debt seems insurmountable on top of credit card payments, talking to a certified credit counselor can help. They may also recommend you for a debt management program, which is designed to combine your loans, pay less in interest, and get out of debt in three to five years.
To better prepare yourself for potential upcoming student loan payments, make an appointment with one of our certified credit counselors today!