Student Loan Debt
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Student Loan Debt
Currently, 3.86 million Californians, or 9.8% of the state’s population has some form of student debt. Nationwide, student loan debt is at an all-time high of nearly $2 trillion and the average loan takes 20 years to repay.
Federal Student Debt Relief Plan
NOTE: The Student Loan Debt Relief program is being challenged in the courts and is currently on hold. The Federal Government will have more updates as they are available.
The U.S. Department of Education previously accepted applications for the Student Debt Relief for federal student loan borrowers. The original deadline to apply was December 31, 2023 The plan calls for:
- Up to $20,000 to be forgiven if a borrower attended college on Pell Grants and
- Up to $10,000 to be forgiven if the borrower did not receive Pell Grants
- Individuals must have earned less than $125,000 in 2021 or 2020
- Married couples must have earned less than $250,000 in 2021 or 2020
The application is a short online form. You are not required to log in or submit any documents. The application will require you to give your Social Security number and confirm that you earned less than the income caps.
When you apply you will receive a confirmation email. The Department of Education will determine your eligibility and will contact you if they need more information. Your loan servicer will notify you when your relief has been processed.
For more detailed information, visit StudentAid.gov.
Avoid scams: Scammers are trying to take advantage of uncertainty about this program. Know the facts to avoid scams.
Note: Leaders of California’s State Senate and Assembly have pledged that debt relief funds will NOT be subject to State tax, despite some news reports suggesting they would.
Payment Pause Extended
The student loan pause has been extended through June 30, 2023 OR whenever there is a final decision by the courts regarding the Federal Loan Debt Relief plan, whichever comes first. The extension will happen automatically. The borrower does not need to apply for an extension. Payments will resume on or before July 2023.
Additional Proposed Reform
To make the student loan system more manageable for borrowers the administration is proposing to create a new income-driven repayment plan that will reduce future monthly payments by:
- Capping loan repayment at 5% of a borrower’s monthly income for undergraduate loans.
- Guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
- Forgiving loan balances after 10 years of payments, instead of the current 20 years, for borrowers with loan balances of $12,000 or less.
- Making sure that no borrower’s loan balance grows if monthly payments are made—even when the monthly payment is $0 because of low income.
For more information, please visit The Federal Student Aid FAQ page.
Federal Student Loan Payment Pause
The American Rescue Plan, in response to the COVID-19 emergency, gave a reprieve to those who currently owe student loans. The law reduced the interest rates on all loans held by the U.S. Department of Education to 0%. The 0% period is retroactive to March 13, 2020. The law automatically set currently active, delinquent, and defaulted federal student loans to 0% and the Education Department suspended collection activity.
The student loan payment moratorium ends June 30, 2023 OR whenever there is a final judgment in the courts regarding the Federal Student Debt Relief plan, whichever comes first.
NEXT STEPS FOR BORROWERS
- Borrowers should update their contact information on their loan servicer’s website and with StudentAid.gov.
- Borrowers should contact their loan servicer to find out what their payment amount will be and when payments restart.
OPTIONS AVAILABLE FOR BORROWERS
- Consider an Income-driven repayment (IDR) plan.
- If the borrower already has an IDR plan but their income or family size has changed they should ask their servicer to recalculate their monthly payment.
- If you the borrower still can’t afford their payment and they only need a temporary pause on payments, they may want to consider a deferment or forbearance.
Fresh Start Program
The U.S. Department of Education announced earlier this year the Fresh Start program, which eliminates the negative effects of default for borrowers with defaulted federal student loans. Borrowers with federal student loans in default will be able to reenter current repayment status without any past-due balance and have other federal student aid benefits and protections restored.
The Fresh Start program will continue through one year after the COVID-19 payment pause ends.
The Fresh Start Program:
- Restores access to repayment options
- Restores eligibility to receive federal student aid so borrowers can complete their course of study and increase long-term repayment success
- Protects borrowers from involuntary collection efforts and costly collection fees
- Restores eligibility for future rehabilitation
- Provides credit reporting features—making it easier and more affordable for borrowers to afford living expenses
Borrowers with Fresh Start-eligible loans must make long-term payment arrangements. Those who do not make payment arrangements during the Fresh Start will again be subject to default collections. Payment arrangements can be made by visiting myeddebt.ed.gov, contacting your loan holder by phone or in writing, or calling the Default Resolution Group at 1-800-621-3115. If you’re not sure whether your loans qualify, you can call the Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923). This program is free, and you do not need to pay to enroll.
Public Service Loan Forgiveness
Limited PSLF Waiver Opportunity
On Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF. Learn more about this limited PSLF waiver.
Most of the PSLF qualifying payment rules were suspended through October 31, 2022. Under this temporary waiver, you may have received credit for payments you’ve made on loans that would not normally qualify for PSLF. These payments would count even if you didn’t pay the full amount or on-time. However, only payments made after Oct. 1, 2007 can count as qualifying payments.
Loan types include: Direct Subsidized Loans, Direct Unsubsidized Loans, and Graduate PLUS Loans made to students.
The California State Loan Repayment Program (SLRP)
Resources for Student Borrowers in California
The California Department of Financial Protection & Innovation works to ensure that student borrowers who have fallen behind on payments have the information they need to get back on track, a crucial part of an equitable economic recovery.
Know Before You Owe
Understand the basics about student loans, including different kinds of loans, interest, the difference between servicer and lender, and more!