Here's What You Need to Know About the New Student Loan Forgiveness Plan
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Thinking of buying a home but need some help with the down payment?
Student loan debt can be a major hurdle for those trying to qualify to buy a house because the amount of the debt can really drive up the DTI (debt to income) ratio. However, the recently announced student loan forgiveness porgram may help!
If you have federal student loan debt, then this new student loan forgiveness plan offering up to $20,000 in forgivable debt is top of mind! According to the Fact Sheet provided by the White House, 90% of debt relief will go to borrowers earning less than $75,000.00. President Biden said that almost 20 million people (about 45% of borrowers) could have their debt fully cancelled and that 95% of borrowers would benefit from the plan in some way.
So who qualifies for forgiveness?
Borrowers earning less than $125,000/yr or couples earning up to $250,000.00/yr who have not received a Pell Grant are elgible for up to $10,000 in forgiveness. Those who meet these income limits and have received a Pell Grant are eligible for up to $20,000 in forgiveness. It's important to note that the amount of forgiveness is capped at your actual debt so for example if you are eligible for $10,000 in forgiveness but have $8,000 in debt, $8,000 would be forgiven.
In order to receive relief, you may either get it automatically if the US Dept. of Education already has your income information but if they don't you will need to apply. The application process isn't open yet is expected to be in early October. In the meantime, borrowers can susbscribe for updates at the US Dept of Education's website. Once the application has been submitted, relief can be expected within 4-6 weeks. The pause on paying student loans has been extended through the end of the year so borrowers are enouraged to apply before Nov. 15th so that they can receive reflief before payments restart.
If you are thinking about buying a home and would like to know the next best steps for you, then set up free strategy call here.
Thanks for Reading,
_________________________
Thinking of buying a home but need some help with the down payment?
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