I dunno if you’ve heard, but the Biden-Harris White House announced some student loan forgiveness this week!

Today we’re going to look at who’s eligible, some hacks and highlights that aren’t getting enough attention, and some common misconceptions about this new program.

Who qualifies for student loan forgiveness?

You qualify for student loan forgiveness if you’re a single tax filer and you make less than $125,000.

If you file as married or head of household, you can make up to $250,000 as a household and still qualify.

Single moms: Pay attention. You likely qualify for the $250,000 income limit.

DID.

YOU.

SEE.

THAT.

You don’t have to be married to qualify for the $250,000 income limit. You qualify for this increased cap if you file as head of household.

This is pretty amazing, as it appears to mean that many single moms (and dads!) can qualify with a higher individual salary. As long as they’re filing head-of-household.

It could also help families who may have other nontraditional family structures.

Do I qualify if I have private student loans?

No. This program only applies to those with federal student loan debt.

How much loan can I get forgiven?

This program gives you $10,000 in forgiveness if you did not receive a Pell grant while in college. It gives you $20,000 in forgiveness if you did receive a Pell grant in college.

Do I get a refund if I owe less than ten grand?

Nah.

If you owe $9,000, you won’t get a $1,000 refund. You’ll just get $9,000 forgiven.

And if you qualify for $20,000 forgiveness?

You’ll still only get $9,000 forgiven. No refunds.

Though there is a hack if you’ve made any payments during the pandemic. Read on, dear reader. We’ll cover it in-depth in just a minute.

Why do Pell grant recipients get more forgiveness?

Pell grants are awarded based on income. That means the recipients have an economic disadvantage compared to non-Pell grant recipients. Essentially, their starting line is further back. They have to do more to achieve just as much as their non-Pell-grant-receiving peers.

While Pell grants can cover the entire cost of most community colleges, they do not come close to covering the costs of your average bachelors-degree-granting school. State schools tend to have a much smaller gap in funding than private schools, but your mileage may vary depending on institutional financial aid opportunities.

That means even if you receive a Pell grant, you’re probably going to have to take out student loans. In fact, you might be more likely to take out student loans because you’re less likely to have financial backing from your family.

Under the Biden-Harris Administration’s student loan debt plan, up to 27 million Pell Grant recipients earning less than $125,000 a year will be eligible for $20,000 in relief – helping those who need it the most. pic.twitter.com/VVsDUHktmO

— The White House (@WhiteHouse) August 25, 2022

Because you don’t have financial backing, you’re more likely to need a job or other means of putting food on the table. You might not only be working to feed yourself; you could be a nontraditional student who has to feed others, or you might be a traditional student who still needs to send some money home to help your family.

This extra stress makes it less likely that you’ll graduate school with a degree.

Which means there’s a disproportionate amount of Pell grant receipients out there with student debt and nothing to show for it. Without a degree, your income potential is stunted. Not only do you have debt and no degree — you also have to pay off that debt on less income.

So Pell grant recipients get more forgiveness. Deservedly.

How do I find out if I got a Pell grant?

Unless you were a nontraditional student, this all likely happened when you were 17. You probably filled out the FAFSA using your parents’ income information.

And let’s be real: You probably didn’t fill out that FAFSA. It was probably your parents handling the paperwork. You might not even remember if you got a Pell grant.

Luckily, it’s real easy to figure out if you got a Pell grant. Just visit StudentAid.gov. Then, click on ‘My Aid.’

There will be graphs and data that pop up showing any loan balance, along with where your aid came from. If you got a Pell grant, it’ll show up here.

I legitimately forgot I got a Pell Grant in college, meaning all my student loans will be forgiven, not just the 10K I originally thought

This will cut my debt in half. HALF!

I am BEYOND excited for this relief. pic.twitter.com/UngDQ7THVd

— 🫧✨Mx. Boops✨🫧 (@mandieboox3) August 27, 2022

How do I claim my student loan forgiveness?

For a lucky few, you won’t have to do anything. If the Department of Education (ED) has all your ‘pertinent’ information, including income information, it should be applied automatically.

But ED is also saying that if you’re ‘unsure’ if ED has your income information, you better assume the process won’t be automatic.

Also, if you’re very sure they don’t have your income information, you need to know that an application will be necessary.

How can I get an application?

Right now, you can’t. The application hasn’t gone live yet.

ED is fervently encouraging people to sign up for its Federal Student Loan Borrower Updates subscription. This is where they’ll be sending out information as soon as the application is available.

When will I actually get my student loan forgiveness?

Good question. We don’t actually know yet. We only know that the application will be available sometime before December 31, 2022.

I paid off my student loans during the pandemic and now I’m pissed.

Ohmigosh I have such good news for you.

If you made any payments on federal student loans during the pandemic (which is still happening, to help you understand the timing,) you can reclaim it.

This was a rule that preexisted Biden’s forgiveness announcement, and turns out to open up a nice little hack: Request a refund of your pandemic payments, get your money back, and watch your balance go up from $0. Then have the $10,000/$20,000 forgiveness wipe out the debt again.

Here’s how to request a refund of your federal student loan payments made during the pandemic.

HINT: It requires getting in touch with your student loan servicer. There is paperwork involved. Be prepared.

Be prepared for a bumpy ride with student loan repayment refunds and forgiveness.

Even before the forgiveness announcement, there were some reported back logs in these refund requests.

And we’re not totally sure when, exactly, forgiveness will be applied.

That means there is a potential scenario where forgiveness is applied before you get your refund. This could be a bad thing if the government doesn’t come back and try to give you forgiveness again after the refund is applied.

Let’s hypothetically say you got a $10,000 refund, but it wasn’t awarded to you until months down the line, after the government had already checked to see if they owed you forgiveness. Then, they don’t come back and try to apply forgiveness to your account a second time. It could end up looking like you still owe $10,000 when repayments start up again.

Fingers crossed that they’re already working on a mechanism to remedy this potential scenario.

But the two programs weren’t released in tandem. And it’s the government. So I’m skeptical.

If you go this route, at some point, you might have to advocate to get any remaining balance forgiven. That doesn’t mean you shouldn’t do it. It just means be prepared — both mentally and in terms of your paperwork.

Other announcements that aren’t forgiveness

There were a bunch of other important bits of student loan news that came out alongside the official forgiveness announcement. Let’s look into them.

The changes to IBR aren’t real yet.

Ten thousand to twenty thousand in forgiveness is very, very real.

But in the same document, the Biden-Harris administration included some proposals for reform to the Income-Based Repayment (IBR) program.

Those are not yet real.

They’re just proposals. Just something the White House wants to see happen.

So even though the proposals are pretty rad, I’m not going to spend a lot of time talking about them. Because they’ll probably change at least a little bit over the coming months as they go through the public comment process.

Student loan payments are coming back. For real this time. Maybe.

BidenLoanPaymentPauseFinalFinalFinal.docx

— Frosty (@amandajhelling) August 25, 2022

The White House swears this is the final extension of the student loan payment moratorium.  For real this time. Pinky promise.

You do not have to start making payments on September 1 anymore. The new expiration date is December 31, 2022, which means payments will resume in January.

To be fair, they have said this is ‘the last time’ before. But this time they may actually mean it. Because Biden is using the resumption of repayments as an argument that this plan is inflation-neutral.

Oh, boy. Here we go.

Does student loan forgiveness cause inflation?

No.

Inflation happens when there are too many people willing to pay top dollar for too few goods.

One of the ways inflation can get worse is if people have too much discretionary spending.

For student loan forgiveness to have any chance of making inflation worse over the next couple years, we would have to assume people were currently making student loan payments.

But they haven’t been. For two and a half years.

People aren’t magically going to get $500 extra in their pocket every month now. Their budget is just going to stay the same.

Any damage that would be caused by the ‘extra’ discretionary income already happened way back in 2020.

Let’s say you don’t qualify for forgiveness. You’ll have to start making payments in January. That’s $500 less you have to spend per month. The White House is arguing that this will actually help combat inflation, offsetting any potential ‘problems’ with forgiveness.

There could be an argument that forgiveness would contribute to inflation over the long-term, as it does cause a deficit compared to the money the government would have had if it had taken it from low- to middle-income private citizens via student loan repayments.

By the same token, the Tax Cuts and Jobs Act of 2017 added a massive long-term deficit to the American government while cutting taxes for only the wealthiest Americans.

Please note: I am not an economist. Here’s where you can find a real economist.

That sweet PSLF deal is changing.

Public Service Loan Forgiveness (PSLF) is an amazing yet frustrating program that allows you to have your federal student loan debt forgiven after ten years of on-time minimum payments — but only if you have the right job, the right type of loan, and were on the right repayment plan.

A lot of people were horrified when the first round of applicants in 2017 found out that they did not, in fact, qualify because they had been on the wrong repayment plan or had the wrong type of loan.

They had been banking on this program as they planned out and made career moves over the past 10 years.

For that reason, during the pandemic the government said you could temporarily change your eligibility by:

• Applying to get past late payments or payments that were less than the minimum due counted towards PSLF.
• Consolidating your loans into the right type of loan to qualify for PSLF, then get past payments under the old loan structure counted towards your 120 minimum payments.
• Applying to get payments that were made under the wrong payment plans counted towards PSLF.

You can apply for this phenomenal program here. And do it quick because as a part of the forgiveness announcement, the Biden administration announced the end date for this program.

You have to get your application in no later than October 31, 2022.

This is extra important with payments restarting in January, and because not everyone will have all of their debt wiped out by the $10,000/$20,000 in forgiveness.

Understanding 87%

President Biden’s student debt plan will provide relief to up to 43 million borrowers earning less than $125,000 a year. Nearly 90% of the benefit of this action will go to borrowers earning less than $75,000 a year. pic.twitter.com/7MLUN9H3jj

— The White House (@WhiteHouse) August 24, 2022

Eighty-seven percent of this forgiveness will be going to individuals who make under $75,000/year.

Let’s break down what that means.

It does not mean that 87% of the people who get forgiveness will be making under $75,000/year. Part of the reason such a large percentage of the forgiveness is going to this demographic is because Pell grant recipients are more likely (though not assuredly) to be lower-income earners. Because of all the reasons we outlined above.

And Pell grant recipients get double the forgiveness.

Another reason for this framing is that it’s accounting for individual income, so a household could presumably make between $75,000 and $250,000 per year, but the person who is getting their loan forgiven contributes less than $75,000 of the total household income. That person would still be included in the 87% the way the numbers are framed.

But we also can’t ignore that a huge reason that so much forgiveness is going to this demographic is that more than half of American households make less than $75,000/year total.

According to the Census Bureau, median household income was $67,521 in 2020, the last year for which data is currently available. That means 50% of households made between zero and $67,521, and the other half made between $67,521 and infinity.

Part of the reason so much forgiveness is going to lower-income households is because such a large portion of our population has to live on less.

Income inequality is visceral American problem.

Even when you’ve got some college education at your back.

This post is in collaboration with Juno.

You’ve probably seen a lot of talk about student loans lately.

Interest rates are super low at the moment.

The pandemic has put federal student loans into forbearance. But what that means for your long-term student loan game varies based on your repayment plan.

You’ve heard murmurs that Biden has initiatives surrounding student loan forgiveness he’d like to see passed into law.

Student loans are a complex topic even in less overwhelming times. If you’re wondering if it’s smart to refinance your student loans right now due to the low interest rates, the answer can be, ‘Yes.’

But only for a small portion of people.

Why would I refinance my student loans?

The primary reason people consider refinancing is to secure a lower interest rate.

Not everyone will be able to secure a lower interest rate through refinancing. There are also several other criteria to consider before refinancing your student loans.

Should I refinance my federal student loans?

Most people probably shouldn’t refinance their federal student loans. When you refinance, a private bank is taking on the student loan that was previously handled by the Department of Education (ED). Refinancing may qualify some borrowers for a lower interest rate.

But at the same time, those borrowers lose access to advantageous federal programs.

Federal repayment plans

One of the biggest programs you’ll lose access to is income-driven repayment plans. Many borrowers qualify for one of the following three programs, depending on the type of federal student loan:

• Revised Pay as You Earn (REPAYE) Plan. Caps your monthly payments at 10% of your disposable monthly income. Undergraduate loans considered paid-in-full after 20 years of payments. Graduate loans considered paid-in-full after 25 years of payments.

• Pay as You Earn (PAYE) Plan. Caps your monthly payments at 10% of your disposable monthly income. You won’t qualify for PAYE if 10% of your disposable monthly income would be more than you would normally pay under a Standard Payment Plan. Loans considered paid-in-full after 20 years of payments.
• Income-Based Repayment (IBR) Plan. Caps your monthly payments at 10% of your monthly income if you borrowed money on or after July 1, 2014, with loans considered paid-in-full after 20 years. Cap is 15% of your monthly income if you borrowed before July 1, 2014, with loans considered paid-in-full after 25 years.. You won’t qualify if the 10%-15% cap is more than what you’d pay under a Standard Payment Plan.

When you’re on an income-driven repayment plan, you may end up paying less over the course of your loan than what you’d pay over all with a private refinance — even if that refinance has a lower interest rate.

This is more likely to be true if you aren’t high-income.

Federal student loan forgiveness, cancellation & discharge.

You’ve likely heard of the Public Service Loan Forgiveness (PSLF) program. With this program, you make 120 qualifying payments while working for a qualified governmental or nonprofit employer. Then, you can apply to have any remaining debt forgiven.

While PSLF is the most recognized forgiveness program, there are several other programs for student loan cancellation or discharge, including:

• Up to $17,500 of student loan forgiveness for eligible teachers.
• Cancellation for specific Perkins loans.
• Discharge of loans due to disability, school closure and in rare instances bankruptcy.

Refinancing your loan with a private lender means you’ll no longer have access to such programs.

Should I refinance my private student loans?

Maybe. Your private student loan already doesn’t come with access to advantageous federal repayment or forgiveness programs, so you have less to lose.

If you can qualify for a refinance with a lower interest rate, you’ll want to ensure that you’re still paying less over the course of your loan. Look out for these costs that can make the lower interest rate a moot point.

Application & origination fees.

When a company charges application and/or origination fees, your loan becomes more expensive. Depending on the size of these fees, they can eat into any savings you’re getting from the lower interest rate.

When comparing rates, make sure you’re looking at the APR rather than the interest rate. The APR accounts for the additional costs of origination fees combined with the interest rate.

Prepayment penalties.

Prepayment penalties prevent you from paying off your debt early. There are plenty of lenders that don’t charge prepayment penalties. Seek these lenders out.

Loan terms.

Ideally, when you refinance, you won’t be moving your final payoff date further into the future.

When you extend your loan term, you might secure a lower interest rate — or even a lower monthly payment — but end up paying more over the life of your loan simply because you’re paying that interest over a longer time period.

Fixed rates vs variable rates.

The lowest rates you’re offered on a refinance are likely to be variable. That means as the Fed raises interest rates, the rates on your loan will change, as well.

Fixed rates stay the same throughout the course of your loan.

We are currently in a low-interest environment. While the variable rates may be lower than the fixed rates, they have nowhere to go but up in the future.

Meanwhile, if you secure a fixed rate, it may be a little bit higher than the variable offer, but it will stay consistent throughout the course of your loan. When the Fed raises rates again, your loan interest will stay put.

There are very, very few people who successfully take advantage of variable-rate loans, and they usually have enough money on hand to pay off the loan before the term ends. Even then it can be a risky scenario to put yourself in.

You should almost always seek out a fixed-rate refinance.

Should I wait to refinance until Biden’s in office?

Any new policy will affect federal student loan borrowers more than private student loan borrowers.

The Biden Administration does have a comprehensive wishlist for higher ed, including federal student loan forgiveness. Some of the wishes include:

• If you’re making $25,000/year or less, you wouldn’t owe any payments or interest on federal student loans.
• Everyone else would pay 5% of their discretionary income above $25,000/year towards student loans. This is lower than the 10%-15% currently offered by income-driven repayment plans. Any remaining balance after 20 years of payments would be forgiven.
• You would no longer have to pay taxes on the forgiven portion of your federal student loans.
• Ten thousand dollars of loan forgiveness per year for public servants for up to five years.

However, turning all of these wishes into laws is going to be an uphill task. Even with Georgia securing the Senate for Biden’s party — even if every last Democrat approves a bill that would turn all the wishes into reality — with such a slim majority the Republicans still have an opportunity to filibuster.

For that reason, some have suggested that Biden should issue an executive order offering $50,000 in forgiveness to all student loan borrowers. On the campaign trail, Biden said he might do something of the sort, but the number he used was $10,000.

Whether or not any of these policies will come to fruition is anyone’s guess. Keep an eye on the news, but as of right now these ideas are not beyond the wishlist stage.

But you should wait out Coronavirus policy.

During the pandemic, federal student loans have been placed in administrative forbearance. That means that you do not have to make any payments until January 31, 2021.

During this period, your loans are not accumulating any interest.

If you are on a Standard Repayment Plan, you will still owe the same amount of money after the forbearance expires. Your payoff date remains the same, which means if you’re not making payments during this time, you could end up with higher monthly payments after the pandemic.

Those best served by this forbearance are those who are on income-driven repayment plans. You don’t have to make payments during this time, but all these pandemic months still count towards your 20 years of repayment even if you pay $0 during this time.

When forbearance expires, you’ll go back to your pre-pandemic payment. Essentially, from March 2020-January 2021, you got credit for payments you didn’t have to make. Zero-dollar payments during this time also count towards PSLF.

When the new administration takes over in a few days, it is possible that the new ED will extend the administrative forbearance. An extension in context of the pandemic would be easier to achieve.

UPDATE: Biden ordered an extension of the administrative forbearance on his first day in office. Once ED approves the order, the forbearance will extend through September 30, 2021.

Who shouldn’t refinance their student loans?

The lowest interest rates are offered to those with the best debt-to-income ratio and the highest credit scores. A high income certainly helps with both of these criteria.

If you’re carrying federal student loans and are not high-income or not working in public service, you may find that lower interest rates are not worth losing access to income-driven repayment plans or forgiveness programs.

Who should consider student loan refinancing?

If you have private student loans, a high income and a good credit score, refinancing may be an option for you.

It may also be an option if you are in the same circumstances with federal student loans — especially if you have loans from grad school. Just make sure you’re secure in your high-income job and that you truly wouldn’t benefit from the advantaged programs that come along with federal loans.

Whether you have federal or private loans, when you refinance you’ll want to make sure that application and/or origination fees are low to non-existent. You’ll also want to ensure that the loan term doesn’t negate the lower interest rates, which are preferably fixed.

How do I find the lowest interest rates on student loan refinancing?

To ensure you’re getting the lowest interest rate on your student loan refinance, you’ll want to do some comparison shopping. Remember to look beyond the interest rate. Make sure the loan is overall less expensive after accounting for loan term extensions and origination fees.

Typically when you apply for a loan, you don’t get an opportunity to negotiate with the lender. They tell you the rates and terms you qualify for, and that’s that.

But there is another option. Companies like Juno negotiate for borrowers en masse, giving them more leverage and allowing you to secure better loan terms. To date, Juno has helped its members save over $26M in interest and fees.

Using Juno to secure lower rates.

Joining Juno is free. You’ll submit some basic personal information, including an estimated credit score and income. These numbers don’t have to be spot on, and Juno will not do a credit check. But you do want them to be relatively accurate.

After you sign up, the company gets to work. They present a large group of student loan borrowers — including you — to several banks and online lenders. Then they have those lenders compete over your collective business. The lender that offers the lowest bid is the one Juno picks.

They then come back to you with the rates and terms they were able to secure for your group in their negotiations. These negotiations happen once-per-year in the Spring.

Juno only works with a handful of lenders. The lowest fixed APR reported by Juno is extremely competitive at 2.25%. Your offered rate could be higher depending on things like income and credit score. Check the APR and terms offered by Juno against other refinance offers from outside lenders to ensure thorough comparison shopping.

You can then choose to take or leave the refinance offer from Juno. If you choose to take it, you’ll use a link sent by Juno to fill out your application directly with the lender.

The lender will do a hard pull on your credit to ensure you qualify for the negotiated rate. This is why it was so important to give an accurate credit score earlier on in the process.

As long as you meet the parameters for the negotiated rate, you’ll be ready to sign your documents directly with the lender. Juno does follow up with you to ensure you’re getting everything the lender promised in negotiations.

Why use Juno?

There are lots of student loan refinancing options. Juno is worth looking at because:

• They may be able to negotiate a lower interest rate than you’d qualify for on your own.
• They attempt to secure other benefits you normally wouldn’t qualify for with a private loan, such as loan discharge in case of death or disability.
• Signing up for Juno is free and risk-free. They don’t run a hard or soft credit pull. And if you aren’t in love with the loan terms they come back with, you are under no obligation to accept.