Financial Feminist - BONUS: Student Loan Forgiveness FAQ

Episode Date: August 25, 2022

On August 24th, 2022 President Biden announced his multi-layered plan to relieve student borrowers. In this episode, Tori Dunlap walks you through the basics of this plan, how it will affect the U.S. on a greater scale, and how to prepare for resumed payments on January 1st, 2023. We put together an extensive list of resources on our show notes page, including more information on student debt relief, the PSLF program, and more: https://herfirst100k.com/financial-feminist-show-notes/student-loan-forgiveness Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hello, financial feminists. Hello. Today's going to be a little different. We are going to be quick and dirty today. We are giving you the student loan forgiveness frequently asked questions answers. Everything you need to know about President Biden's recent announcement about student debt forgiveness, about potentially future student debt forgiveness. We're going to answer every question that we can today in a very short, actionable episode. We are literally recording this the day before it comes out. And we're doing this because we know this info is valuable. We know it's important. the day before it comes out. And we're doing this because we know this info is valuable. We know it's important. And share it with your friends. Share it with your peeps because I want every

single person who qualifies for student debt forgiveness to get it. Okay, let's dive right in immediately. So student loan forgiveness was announced yesterday by President Biden. For anyone making less than $125,000 a year or $250,000 for a married couple, up to $10,000 of debt will be canceled. If you are a Pell Grant recipient, that goes up to $20,000. So again, $10,000 in student debt cancellation to non-Pell Grant recipients making less than $125,000. If you are a Pell Grant recipient, that goes up to $20,000. In addition, President Biden announced that the pause on federal student loan repayment will be extended one final time through the end of this year, and they should expect to resume payment in January of 2023, January of next year.

to resume payment in January of 2023, January of next year. Okay, a couple fun facts about this. A $10,000 student loan forgiveness plan would wipe out the student balances of around 31% of students while halving the student debt balances of another 21% of borrowers. So this impacts over half of the people, half of Americans who have student loan debt, which is millions of people. But in 2019, one of the healthiest periods of the economy, 10 million borrowers were still behind on their payments. So while we applaud progress today, tomorrow we demand more. This is hugely impactful, especially for students of color. 90% of black students took out loans. Over 90% of Black students took out loans. Over 75% of Latino students took out loans. So for especially lower income students, minority students,

this is a huge win, but more progress is needed. So today we celebrate, we pop a little bit of champagne, and tomorrow we demand better and go back to work. Now, what about private student loans? Unfortunately, private student loans are exempt from the student loan forgiveness. Fucking sucks. But this only applies to federal student loans. Kristen, our lovely podcast producer, gave a full two thumbs down and a tongue all the way out because I know that she is one of the people, one of the millions of Americans who has private student loans. So in terms of paying down private student loans, this doesn't really affect you. I'm sorry. It doesn't affect you. We'll put resources in the show notes, including a platform that we love called Juno to potentially lower your

interest rate for student loans as well as a couple tips to pay them off. But if you have private loans, this doesn't change really anything. If you do have federal loans and you qualify, you're one of those Americans who has fit the qualifications. We will also link down below where you go to actually like submit your information. To my knowledge, it's not going to happen automatically. You have to go submit your information. So please, again, if you're one of those people and you qualify, or if you don't know if you qualify, go check and then go actually apply for this. I don't want you missing out on either entire student debt forgiveness

or at least a little bit of help because you thought it would just kind of happen on its own. The other question I saw a lot from our post yesterday in our community was, is more coming? Like, should I expect more student debt forgiveness? This is why policy change has to be coupled with personal finance education is, yes, we hope more policy change is coming. We hope more student debt forgiveness is coming. However, we cannot rely on it. If you're that person who's like, yeah, I'll just not pay any of my loans and default on them because forgiveness may be question mark, not the right way to go. So you need to couple voting and policy change

and supporting candidates who support student loan forgiveness with also having a plan to pay those loans off. If you are one of the people who has federal student loans, but you make over $125,000 a year or $250,000 for married couples, right now student debt forgiveness does not apply to you. Now, it gets a little murky on how much income. I literally saw a post from one of our community members who's like, I work as a nurse and I had overtime, and so I made more than $125,000 last year. I am not an accountant. There's a lot of news still coming through, but please, again, go check. If you're close to $125,000, if you're a little bit over, might be worth going

and checking. The other significant thing about President Biden's announcement is that income-based repayment plans are changing the cap. Before, the cap on these plans was 10% of your monthly discretionary income. So if you had an income-based repayment plan, it was capped at 10%. Now it's capped at 5%. So that should offer a little bit of temporary relief as well. Okay, let's go through some quick guidance steps as we are wrapping up. First, take a deep breath, relax. This is good news for so many people. But again, without meaningful forgiveness, without understanding the root of the student debt crisis, this is just another reprieve. So here's how to make sure you're prepared if a pause is not extended and it's looking like it won't be extended past December. Buff up your emergency fund when payments are paused right now. Do

everything you can to increase your emergency fund. If you can afford payments, keep making them because right now your interest is not accruing. We've discussed this on the show before, but the way to pay off debt is by contributing money to the principal because that's the original amount of money you took out. This is why debt feels like you're drowning as you're often having to put money towards not just the principal but also the interest. So if interest is not accruing right now, it's a great time to make a dent in those student loans. We also want to figure out what our payments would be when the loan resumes and work towards

figuring out what's going to happen, right? Getting a plan together so that you are prepped and ready come January 2023. And if you do have private loans, look into potentially refinancing them. Again, we'll link down below a couple resources for that. You also have the opportunity to negotiate both your everyday bills, your pay, and eventually actually your loan. You could potentially negotiate the interest rate on your loan. In addition, whether you have loans or not, whether they're paused or not, now is a great time to do some negotiation. We have a whole episode, episode 19, about how to negotiate with confidence. You can negotiate your everyday bills, your phone bill, your cable bill in order to cut down your

expenses. Negotiating your pay, making sure you're being compensated fairly, especially during times of inflation. You can also sometimes negotiate your interest on your loans. Again, links below. Or actually negotiate your payment plan, especially if you're low income, especially if you're already struggling to make ends meet and to pay your loans. put in a call to your student loan provider. Tell them your current situation. Tell them this is what I can afford to pay. And they might give you some flexibility. We've seen it work before. Again, we put so many more resources in our show notes. We are doing this quick and dirty episode to make sure that we are giving you some information you need, but I want to make sure that you know everything you need to and that you're armed with

the tools and the resources you need to know if the student debt forgiveness makes sense for you, if it's something you qualify for, and to get a plan together if you have private loans, if the forgiveness doesn't apply to you, etc. I will say it again. The student debt crisis is a crisis not because of personal decisions, but because of a lack of support at the societal systemic level. So while we applaud progress today, we demand better tomorrow. If you did have some of your student debt, all of your student debt forgiven today, If you did have some of your student debt, all of your student debt forgiven today, congratulations. Go get yourself an ice cream cone, pop a bottle of champagne. It's a very exciting thing. And I doubt you're listening to this podcast if this is you. But if you are the

person who is thinking, well, I had to put myself through college. I had to pay off my loans. Fuck everybody else. Politely, that's not the vibe. That is not the vibe today. Yes, maybe it sucks that you had to contribute more money. It sucks that maybe you don't get student debt forgiveness. However, just because I might not be getting front row seats to Harry Styles doesn't mean that I'm upset when someone else does. So if you are that person, check yourself before you wreck yourself, aka go and tweet some shit. And if you are the person who's a little bummed today because maybe you make too much money, maybe you have private loans, maybe it's just not something that is affecting you, loans. Maybe it's just not something that is affecting you. I'm sorry. I see you. I hear you.

We're here to support you. And we hope that this is one step of many towards broader forgiveness. As always, Financial Feminists, we appreciate you being here. Thank you for coming with us on this little spontaneous news alert journey on Financial Feminist. And please do share this episode with the people who need it most. See you later. Thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, marketing and administration by Karina Patel, Olivia Koning, Sharice Wade, Alina Hilzer, Paulina Isaac, Sophia Cohen, Valerie Oresko, A huge thanks to the entire Her First 100K team and community for supporting the show. For more information about Financial Feminist, Her First 100K, our guests, episode show notes, and our upcoming book, also titled Financial Feminist,

visit herfirst100k.com.