USM Professor Addresses Questions about Student Loan Forgiveness Plan

Tue, 09/06/2022 - 10:54am | By: Van Arnold

Last month, President Joe Biden announced some, but not all, of the details surrounding his student loan forgiveness plan. While there are plenty of places on the web to read about the political and fiscal pros and cons of student loan forgiveness, the question remains “who is affected?”

Mike Morgan, a professor of practice in The University of Southern Mississippi (USM) College of Business and Economic Development’s School of Finance, explains that the most pertinent question from his students is “does this cover current college students?” And the answer to that is a clear “yes.” 

“The program covers federal student loans that were on the books as of June 30, 2022,” said Morgan. “It does not matter if you are a current student, graduate, or former student.  If you had a federal student loan on June 30, 2022, it is included.”

Other key questions to consider from the proposed loan forgiveness plan: What if you are a current college student but you don’t have loans? Can a student go borrow money for the fall semester in hopes of having the loan forgiven? 

“The answer to that is “no”. The loan has to have been in effect on June 30 of this year,” added Morgan. “The same rule applies to loans that may have been paid off prior to June 30.  If the loan is not outstanding on June 30, 2022, it does not qualify.  That’s not to say that the rules won’t change as details emerge.” 

Morgan explained that the student loan forbearance order has been extended seven times since it was announced in March 2020 due to Covid-19. But as it stands today, the student loan forgiveness order applies to loans that were outstanding on June 30, 2022.

Speaking of the forbearance order, part of the president’s order includes an extension of student loan payment forbearance program through December 31, 2022. 

How much debt will be forgiven?

“Borrowers who qualify can have up to $10,000 of federal student debt cancelled,” said Morgan. “If the student received a Pell Grant, the eligible amount rises to $20,000. High-income borrowers are not eligible for forgiveness. High-income borrowers are defined as those earning $125,000 in the latest tax year ($250,000 for married filing jointly status).”  For borrowers who think they qualify, Morgan notes that it is probably a good idea to file a 2021 tax return even if you previously were not required to.

How does a person apply for forgiveness?

“At this time, the details are being worked out but the intent is for an application process to go live before the end of the year,” said Morgan. “The Department of Education announced recently that more details about eligibility and details about the application process would be forthcoming”

Biden’s announcement included a long list of other details regarding student loans. This includes adjustments to how the minimum loan payment is calculated along with the number of years that payments must be made before other loans can be forgiven (on top of the $10,000 forgiven this year).

“We need to remember that this is an executive order and what we got was the framework of the program,” added Morgan. “The ability for the president to issue an executive order of this magnitude is not without question and there very well could be legal challenges to the president’s authority to get this over the finish line.”  

Certainly, there will be more details and clarifications issued before the application process starts at the end of the year.

“In other words, if this affects you, keep your eyes and ears on over the coming weeks and months because there are plenty of details yet to come,” said Morgan. “And as always, when dealing with student loans, keep good records.”