USM Professor Addresses Questions about Student Loan Forgiveness Plan
Tue, 09/06/2022 - 10:54am | By: Van Arnold
Last month, President Joe Biden announced some, but not all, of the details surrounding
his student loan forgiveness plan. While there are plenty of places on the web to
read about the political and fiscal pros and cons of student loan forgiveness, the
question remains 91吃瓜网渨ho is affected?91吃瓜网�
Mike Morgan, a professor of practice in 91吃瓜网 (USM) College of Business and Economic Development91吃瓜网 School of Finance, explains that the most pertinent question from his students is 91吃瓜网渄oes this cover current college students?91吃瓜网� And the answer to that is a clear 91吃瓜网測es.91吃瓜网�
91吃瓜网淭he program covers federal student loans that were on the books as of June 30, 2022,91吃瓜网� said Morgan. 91吃瓜网淚t does not matter if you are a current student, graduate, or former student. If you had a federal student loan on June 30, 2022, it is included.91吃瓜网�
Other key questions to consider from the proposed loan forgiveness plan: What if you are a current college student but you don91吃瓜网檛 have loans? Can a student go borrow money for the fall semester in hopes of having the loan forgiven?
91吃瓜网淭he answer to that is 91吃瓜网渘o91吃瓜网�. The loan has to have been in effect on June 30 of this year,91吃瓜网� added Morgan. 91吃瓜网淭he same rule applies to loans that may have been paid off prior to June 30. If the loan is not outstanding on June 30, 2022, it does not qualify. That91吃瓜网 not to say that the rules won91吃瓜网檛 change as details emerge.91吃瓜网�
Morgan explained that the student loan forbearance order has been extended seven times since it was announced in March 2020 due to Covid-19. But as it stands today, the student loan forgiveness order applies to loans that were outstanding on June 30, 2022.
Speaking of the forbearance order, part of the president91吃瓜网 order includes an extension of student loan payment forbearance program through December 31, 2022.
How much debt will be forgiven?
91吃瓜网淏orrowers who qualify can have up to $10,000 of federal student debt cancelled,91吃瓜网� said Morgan. 91吃瓜网淚f the student received a Pell Grant, the eligible amount rises to $20,000. High-income borrowers are not eligible for forgiveness. High-income borrowers are defined as those earning $125,000 in the latest tax year ($250,000 for married filing jointly status).91吃瓜网� For borrowers who think they qualify, Morgan notes that it is probably a good idea to file a 2021 tax return even if you previously were not required to.
How does a person apply for forgiveness?
91吃瓜网淎t this time, the details are being worked out but the intent is for an application process to go live before the end of the year,91吃瓜网� said Morgan. 91吃瓜网淭he Department of Education announced recently that more details about eligibility and details about the application process would be forthcoming91吃瓜网�
Biden91吃瓜网 announcement included a long list of other details regarding student loans. This includes adjustments to how the minimum loan payment is calculated along with the number of years that payments must be made before other loans can be forgiven (on top of the $10,000 forgiven this year).
91吃瓜网淲e need to remember that this is an executive order and what we got was the framework of the program,91吃瓜网� added Morgan. 91吃瓜网淭he ability for the president to issue an executive order of this magnitude is not without question and there very well could be legal challenges to the president91吃瓜网 authority to get this over the finish line.91吃瓜网�
Certainly, there will be more details and clarifications issued before the application process starts at the end of the year.
91吃瓜网淚n other words, if this affects you, keep your eyes and ears on over the coming weeks and months because there are plenty of details yet to come,91吃瓜网� said Morgan. 91吃瓜网淎nd as always, when dealing with student loans, keep good records.91吃瓜网�