Snapshot: Federal Student Loan Forgiveness
A version of this article was originally published by our colleagues at Goldman Sachs Ayco Personal Financial Management.
Share this article
On August 24, President Biden announced a monumental step in student loan forgiveness.
If you’ve got federal student loan debt, you’re not alone: 45 million Americans do. While the pause on repayment has offered some breathing room, borrowers are awaiting specifics on the president’s student debt relief plan.
Here’s what we know so far:
- Up to $10,000 of undergraduate student loan debt will be forgiven.
- Up to an additional $10,000 of debt will be forgiven for Pell Grant recipients.
- The total debt forgiven won’t exceed the amount still owed.
- To qualify, individuals must earn $125,000 or less in gross income.
- The pause on student loan repayment has been extended through December 31, 2022 and will not be extended again.
- When loan repayments resume, the monthly payment will be capped at 5% of monthly income (instead of the current 10% of monthly income cap).
Smart steps you can take before student loan repayment begins
For many of us, student loan payments can be a significant bill to pay each month. The average monthly student loan payment is about $460 according to the Education Data Initiative, a research organization that collects data and statistics about the US education system.
While the loan forgiveness plan and pause on repayment will be helpful for many, it’s important to keep in mind that loan payments will resume for many borrowers down the road.
Here are a few tips to help you prepare.
- Revisit the details of your current federal student debt. Make sure you know your balance, how long you will need to make repayments before your loans are paid off, your interest rate and repayment type.
- Explore your refinancing options. Consolidating your loans with one lender may result in a lower interest rate. Your interest rate will be based on your credit score and current interest rate environments.
- Work on your credit score. One way to do so is to pay off other debt like high interest credit cards. This will help improve your credit score so you can take advantage of lower rates should you choose to refinance any remaining debt.
- Plan for your loan payment in your monthly budget now. You can use your monthly repayment amount to pay down other debt or earmark for savings (like your emergency fund.)
Bottom line? Exploring all of your options and making sound decisions about student loan debt can make a big difference over the life of a student loan. You made an investment in yourself with your education. Now make sure you have a plan in place to pay back your loans.
Want to learn more about
Goldman Sachs Personal Financial Management?
Get Started
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC (“GS&Co.”) and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization. Advisory services are offered through United Capital Financial Advisers, LLC and brokerage services are offered through GS& Co., member FINRA/SIPC.
GS PFM makes recommendations based on the specific needs and circumstances of each client. Clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. Investing involves risk, and investments may lose value. There are no investment strategies that guarantee a profit or protect against loss.
GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. The material is based upon information which we consider reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. The information, data, analyses, and opinions contained herein include confidential and proprietary portfolio information of GS PFM, may not be copied or redistributed for noncommercial or personal purpose without GS PFM’s expressed permission.
All names, logos, and slogans identifying GS PFM or GS PFM’s products and services (including, without limitation, HonestConversations®, MoneyMind®, FinLife®, Financial Control Scorecard®, Live Richly., We Help You Live Richly., Helping People Live Richly®, One Best Financial Life®, Ideal Life Index®, GuideCenter®, InvestmentViewfinder., GS PFM Financial Life Management®, and Financial Years of Freedom.) are trademarks and service marks or registered trademarks and service marks of GS PFM or its affiliates in the United States and/or other countries.
Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA, which is an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management.
Related Content
Connect with us on social media
Join our Marcus social media community, where we share content and inspiration to help improve your financial health. See you there!
