Buffalo, N.Y. (WBEN) - On August 24th, President Joe Biden announced $10,000 in forgiveness of student loan debt for most borrowers and $20,000 to those with Pell grants, with limitations on those who make over $125,000 annually. Applications are not going to be released until early October.
Jeff Boron from Send Your Kids To College says that you should apply as soon as possible and get notification updates, "They're gonna want to apply as soon as the application is available and it is not available yet. But they can actually subscribe to get a notification. If they go to ed.gov, they can put their name on the list, and they'll be notified as soon as the application is available."
When should be the latest you should apply? Experts are saying you should be okay by November 15th. The government is saying that borrowers should start seeing the debt cleared in about to four to six week from application.
"Get your application in by November 15. Therefore, it'll be processed by December 31. January 1 is when loan payments resume, That had been on pause now for quite some time," Boron advises. The Biden administration has pushed back resuming college payments a total of seven times to date.
Borrowers who are eligible for forgiveness can apply for student loan forgiveness until the end of 2023. But again, it is advisable to get your application in many weeks prior to the end of this year. If you owe more than what the forgiveness covers, your repayment plan could be restructured so you don't have to pay as much monthly.
Income-driven repayment plans are still an option, but according to Boron, it should be a last option, "I look at income based payment plans as kind of a last resort as opposed to something you go to first just to make life a little simpler, or a little less expensive. In the long run with income based repayment plans, you are going to pay more in interest costs. So you're not changing the loan, you're just kind of stretching it out and you're going to end up paying more interest over time, unless some of these proposed income-based repayment plan changes go into effect."
Biden's announcement in August came with a new potential change to income-driven repayment plans (IDR). The new IDR plan will have a poverty exclusion of 225%. That means more borrowers will not have to pay anything on their student loans under the plan This includes borrowers who make up to $15 an hour, according to the White House. It also means that borrowers with higher incomes would pay less than under other IDR plans, since a larger portion of their income would be excluded. Other parts of the plan are said to include a more affordable repayment formula, a shorter repayment term for smaller loan balances and an interest accrual waiver. No formal regulations have been released.
It is important to note that spam calls have been on the rise according to Federal Trade Commission, promising to erase your student loan debt and asking for personal information. Boron says institutions will not be cold calling you and that you should try to put these spam numbers on your blocked list as soon as possible.
For the future student loan borrower, Boron advises you to not bank on more loan forgiveness in the future and try to find ways to absolve or avoid significant debt in advance.
See the player below to hear more from Jeff Boron:
