The average student loan balance in New Jersey is $36,800. Student loans are a significant source of financial distress for many residents.
That’s why it’s so important to understand the new student loan debt cancellation program enacted by the White House.
$10,000 to $20,000 in Forgiveness
You may be eligible for loan forgiveness if you had Department of Education (not private) student loans. You must also make less than $125,000 per year.
Pell Grant recipients are eligible for up to $20,000 in forgiveness. Those who did not receive Pell Grants are eligible for up to $10,000 in debt cancellation.
Both amounts are capped to the amount of your outstanding debt.
Most borrowers won’t have to do anything to receive this relief. It’s being automatically processed if you have relevant income data on file with the U.S. Department of Education. You can check the data this department has, and whether or not you received a Pell Grant, at www.studentaid.gov.
If you aren’t sure whether or not the government has your information, an application form will be available in October. It will take about six weeks to submit the application. 8 million people already have data on file.
It may even be a good idea to apply if you are sure the government has your information on file, just in case.
Once the loans are forgiven you should receive a notice from your loan servicer.
Other Relief
While the student loan forgiveness program made headlines, there are other forms of relief available. Borrowers are now required to pay no more than 5% of their discretionary income monthly on undergraduate loans if they are on the income-driven repayment plan. It also raises the amount of income considered non-discretionary; borrowers making less than $15 an hour may not have to pay any money on IDRs.
Loan balances will also be forgiven after 10 years instead of 20 years if the original balance is $12,000 or less.
Finally, the government is covering interest, so the balance doesn’t grow as long as monthly payments are made, even if monthly payments are zero.
Need more financial help?
Many New Jersey residents have private loans that are unaffected by these measures. If that’s the case, you may still be struggling. Fortunately, the Supreme Court has ruled that private student loans may be discharged in bankruptcy.
If you’re in trouble and need financial help, don’t hesitate to reach out to our office.
See also:
7 Signs It’s Time for Newark, NJ Residents to Consider Bankruptcy