The Biden administration has announced plans for another wave of student debt forgiveness, this time involving more than $1.3 billion in federal student loan debt held by more than 230,000 people.
In many cases, their loan balances were previously wiped out by the government, but then came back — like zombies — because the borrowers had failed to keep officials updated about their incomes.
The administration says it’s another step to make sure student loan debtors “receive support and protection during the COVID-19 emergency,” similar to the pause in student loan payments and interest that’s now in place through Sept. 30.
That’s giving millions of Americans some breathing room to save, invest or get a handle on their other debts.
Who’s eligible for the new forgiveness?
The Department of Education says the borrowers eligible for the new student loan forgiveness are totally and permanently disabled. They’d been required to submit earnings documentation for three years as a condition of their loan discharges, to demonstrate that they continued to need the relief.
Loans were reinstated if the borrowers failed to show that their incomes remained below government thresholds. But the Government Accountability Office found that 98% of the time loans were revived, the reason was that the borrowers didn’t turn in their paperwork — not that they made too much money.
For the rest of the pandemic, the administration is scrapping the proof-of-income requirement for seriously disabled borrowers whose loans have been dismissed. The change is retroactive to March 13, 2020, when the COVID crisis first flared up.
“Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency,” says Education Secretary Miguel Cardona, in a news release issued this week.
What about broader student loan forgiveness?
The new wave of student loan relief comes about a week and a half after the Biden White House canceled about $1 billion in debt for borrowers who said their schools had ripped them off or deceived them.
And it comes as calls grow louder from members of Congress who are urging the president to obliterate up to $50,000 in federal student loan debt for every American saddled with unpaid college loans.
Biden has stated publicly that he’s willing to cancel $10,000 in student debt, but he’s said he’s not sure that he has the authority to go to $50,000. For now, the president is working on other priorities, including a plan to fix crumbling roads and bridges — and raise some taxes to pay for that work.
But to help clear a path for broad student loan forgiveness, Democrats made sure that the recent aid bill providing $1,400 stimulus checks also included a provision making canceled student loans tax-free until 2026. Normally, forgiven debts are taxed as income.
What if your student debt isn’t being canceled — and you need relief now?
If the administration’s two recent rounds of student debt forgiveness haven’t included you, here are a few ways of giving yourself some relief in the face of overwhelming student loan debt.
For starters, look into refinancing your student loans. Interest rates for private student loans have hit record lows, so replacing your federal student debt with a new and cheaper loan from a private lender could cut your monthly payments substantially.
Or, consider these ways to save money elsewhere in your budget, so you can get a better grip on your student loan burden:
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Find cheaper car insurance. Many of us are now working from home and driving less, and some car insurance companies have been giving their customers price breaks. If yours won’t cut you any slack, it’s time to shop for new coverage that could save you hundreds of dollars a year.
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Get yourself a side hustle. Turn your skills and talents into a side income by using a marketplace that will match the services you can provide with customers eager to pay for them.
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Take small steps that that can add up to big savings. When you go to the grocery store, use an app that gives you cash back just for snapping a photo of your receipt. And, before the next time you shop online, download a free browser add-on that will automatically search for better prices or coupons.
