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WASHINGTON, DC – AUGUST 25: George Washington University student Tuana Gitonga and other student … [+] loan debt activists rally outside the White House a day after President Biden announced a plan that would cancel $10,000 in student loan debt for those making less than $125,000 a year in Washington, DC, on August 25, 2022. (Photo by Craig Hudson for The Washington Post via Getty Images)
The Washington Post via Getty Images
Any day now the Biden administration is finally going to drop the applications forgiving $10,000 in student loans per borrower making less than $125,000, which is a huge win for students of color. The U.S. Department of Education has said its application for student loan forgiveness will go live in early October, meaning we could be seeing the start of millions of dollars in student debt being wiped out. Here’s how you can start preparing for when the big moment occurs that has the potential to start closing the racial wealth gap.
The Breakdown You Need To Know:
About 19% of households that have total incomes below $125,000 have student loan debt, according to the Urban Institute. The Roosevelt Institute brief shows that canceling up to $50,000 of student loan debt per borrower would immediately increase the wealth of Black Americans by 40%.
Four years after graduation, the average Black borrower owes $53,000, while the average white borrower owes $28,000, according to the Brookings Institute. CultureBanx reported this means they are unable to focus on other financial goals like buying a home, paying off credit card debt, and saving for retirement. Eliminating this debt will start to narrow the racial wealth gap for young families, with 86.6% of Black students taking out federal loans to attend four-year colleges.
These are the ways you can get ready to put this debt behind you.
First, Make Sure You Can Secure The Forgiveness Bag:
Borrowers who make less than $125,000 per year, or married couples or heads of households earning less than $250,000 will qualify. The Education Department will be considering people’s so-called adjusted gross income, this can be found on the front page of your federal tax return 1040 form, on line 11. Whether or not you get to cancel $10,000 or $20,000 depends on if you received a Pell Grant, which is a type of higher education aid available to low-income students.
Second, Get Your Loan Affairs In Order:
Compile a record of your loan amounts using pdf’s, and screenshots. Make sure you have a clear accounting of just how much you still owe the government for your student loans.
Third, Understand Your Loan Servicer’s Process (if needed):
The borrower and loan servicer need to be on the same page to this a smooth translation. make sure your servicer, as well as the Education Department, has the most recent contact information for you. You can make sure that data is current at StudentAid.gov.
What’s Next:
Be sure to stay in the know until the application is ready. The Department of Education wants borrowers to sign up on its website for updates. Once the applications are up and running, people have until Dec. 31, 2023 to apply.
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