Sep 22, 2022
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President Joe Biden’s move to wipe out $10,000 to $20,000 of student loan debt for up to 43 million potential borrowers is welcome relief, but might not be enough to help many older debtors.
For those who went to school decades ago, helped their children cover college or pursued higher education in middle-age, years of interest have ballooned their balances.
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And while the forgiveness may feel like a drop in the bucket, older borrowers will no doubt be glad for any amount of relief. Here’s how to prepare for it.
Debt for older borrowers is only growing
According to the Department of Education, 4.8 million borrowers between the ages of 50 to 61 owe a combined $225.8 billion in student loan debt, while 1.4 million borrowers 62 and older owe $70.2 billion.
Those numbers have been rapidly building over the past five years, as baby boomer borrowers age and interest builds on the loans at a rate that often far exceeds the original amount borrowed for school.
As of mid-2018, the total debt owed by borrowers 62 and over was less than half of what it is today.
More: Refinance your student loan at a lower rate with Credible
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A clean slate
The $10,000 loan forgiveness applies to borrowers of undergraduate, graduate and Parent PLUS loans managed by the Department of Education with incomes of $125,000 or less for an individual, $250,000 for couples.
If the borrower received a Pell Grant — which goes to the poorest students — up to $20,000 in debt will be forgiven.
Assuming they meet the income limit, the $10,000 in forgiveness could wipe out the total debt for 1.84 million borrowers between 50 and 61 and for 870,000 borrowers 62 and older.
What to do as a borrower
You’ll need to file an application, which is expected to be available in October.
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While there’s no deadline to apply, the department recommends filing by Nov. 15.
From there, the application process is expected to take four to six weeks. Borrowers can either check back on the Department of Education’s site for updates on debt relief or register to get them by email.
And if you happened to pay down your balance over the pandemic, you can still qualify for some forgiveness.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
If you owe more than will be forgiven
More than 4.5 million borrowers over 50 owe balances ranging from $20,000 to more than $200,000.
Right now, the pandemic-related payment pause continues until December and debtors will need to restart loan payments in January.
In the meantime, borrowers might want to start putting aside some extra cash and budget to restart their payments or rehabilitate loans that are in default.
And in the few months before payments resume, there are a few other things you can do to get organized:
- Review loan details and confirm your loan servicer, which may have changed since the freeze began. You can find more information on this through Federal Student Aid.
- Check your status if you’re in the Public Service Loan Forgiveness to be sure you get credit for the months during the pandemic payment pause. There are special temporary changes ending on Oct. 31 that allow borrowers to receive credit for past periods of repayment that would otherwise not qualify for forgiveness.
- Review your payment options. Since you were last regularly paying your loan, some updates and changes have been made to several repayment options that may offer more flexibility.
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Brian J. O’Connor is an award-winning personal finance journalist featured in The New York Times, The Wall Street Journal, MarketWatch and other outlets. He was the financial editor and columnist for The Detroit News and founding managing editor of Bankrate and a Knight-Bagehot Fellow at Columbia University.
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