When Will Student Loans Be Forgiven?
See our latest: Biden's Student Loan Forgiveness: What it Means for You
Student loan borrowers have been paying attention since President Biden pledged during his 2020 presidential campaign to forgive $10,000 of federal student loan debt per person. And it's expected that the administration will stick with that promise, forgiving $10,000 of federal student loan debt for borrowers who make $125,000 or less annually.
The original plan forgave $10,000 of federal student loans for single tax filers who make $150,000 or less or $300,000 jointly. The current plan is $25,000 less, meaning tax payers who file jointly will need to have an income of $250,000 one less to qualify. For context, the average federal student loan balance is a little more than $37,000 according to Educationdata.org, a website dedicated to collecting data on the U.S. higher education system. And around 43.4 million borrowers have loans with the Education Department.
Plus, the Education Department may change some regulations currently in place. Released , the department listed a slew of new proposals to help improve what they deem a "broken" lending system. Interest capitalization, when accrued interests is added to a loan's principal, can cause some loan balances to balloon quickly. The Education Department proposes eliminating this additional cost when a borrower enters repayment, exits forbearance, defaults on a loan or exits income repayment plans. The rules are scheduled to go into effect no later than July 1, 2023. And the public can comment on the proposals for the next 30 days, with the final ruling coming in November.
