Student Loan Forgiveness Provides Financial Advice Opportunities (Article)
Student Loan Forgiveness Provides Financial Advice Opportunities
Amid many questions and unknowns, there are huge opportunities for financial advisors to step in, provide solutions that build financial wellness and aid participants in implementing helpful strategies for student loan repayment.
To better serve his participants, Francis Money Advisor Jayson Voigt recently listened into a webinar on student loan forgiveness and its impact on financial planning.
Here are a few key things he learned:
- Individuals who paid off their loans during the recent COVID-19 Loan Repayment Deferral, which began in March 2020, can request a refund of those payments in order to have them forgiven.
- The changes to the Public Service Loan Forgiveness (PSLF) Program will correct some previous issues and allow more people to get closer to loan forgiveness. Important Note: The “limited PSLF waiver” refers to the time-limited changes to PSFL Program rules that permit borrowers to receive credit for previous periods of repayment that would otherwise not qualify. This opportunity end and applications are due on October 31st, 2022 – don’t wait till the last minute!
- The proposed changes to the Income Driven Repayment (IDR) Plan would reduce monthly payments, reign in compounding interest and speed up loan forgiveness. According to gov, this is how it would work:
- Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans as opposed to 10% under the most recent IDR plan.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 222% the federal poverty level will have to make a monthly payment.
- Forgive loan balances after 10 years of payments instead of 20 years.
- Cover the borrower’s unpaid monthly interest so that borrowers’ loan balances will not grow as long as they make monthly payments – even if that monthly is $0 because their income is low.
Now’s the time to educate ourselves on the coming changes and be prepared to support participants through them. Thanks to Envestment and PayforED for hosting a wonderfully educative session on the Student Debt Relief Plan.
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