The Biden administration's student debt relief plan will be costly and tough to administer. An early estimate pegged the price tag at north of $300 billion, easily canceling out the benefits resulting from the Inflation Reduction Act. The pause on payments for federal student loans has been extended until yearend to give the Department of Education time to put the plan in place.
Besides administrative issues, there are other hurdles. One is legal uncertainty. Expect lawsuits arguing that the administration can't do universal debt relief without Congress. Others worry about the effect on the economy.
Former Treasury Secretary Larry Summers warned on Twitter that student loan debt relief "is spending that raises demand and increases inflation."
A quick recap. Individuals. with federal student loans who meet certain income thresholds will qualify for $10,000 in debt cancellation (Parent PLUS loans are also eligible). If you have Pell grants, you may be eligible for debt cancellation of up to $20,000. You qualify if you are single and earn less than $125,000, or you're married and file your taxes jointly or are a head of household and your income is less than $250,000. Eligibility will be based on your adjusted gross income. Income figures from either 2020 or 2021 can qualify you for eligibility, but 2022 income will not.
The Department of Education has 8 million borrowers' income data. Others have to apply. Stay tuned for guidance from your student loan servicer. The department should have an application available by early October. You can sign up for e-mail updates from the Department of Education at www.ed.gov/subscriptions. The department will stop taking applications on December 31, 2023.
This story is from the November 2022 edition of Kiplinger's Personal Finance.
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This story is from the November 2022 edition of Kiplinger's Personal Finance.
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