If you have ever wondered how student loans affect your future, you're certainly not alone. According to a recent study, 43 million Americans take out student loans to pursue higher education.
Many students across the country turn to financial aid in pursuit of a future that is fulfilling and financially stable. When it comes to financial preparation, estate planning is an important responsibility.
Student loans certainly play an important part in estate planning. While these loans are generally discharged in the event of the borrower's death, key factors affect how your student loan debt will be handled.
Things to Consider When Factoring Student Debt Into Your Estate Plan
To avoid burdening your family and loved ones, it's important to understand how student loans will factor into your estate planning. Here are some key elements to consider as you prepare for the future.
Are Your Loans Private or Federal?
Federal loans are typically discharged following a borrower's death. Although federal loans are generally discharged after a borrower's death, it isn't as easy as snapping your fingers. There are steps that your beneficiaries will need to take to become debt-free, including a formal request for loan relief and submitting appropriate documentation.
A Federal Family Education Loan (FFEL) is a federal loan funded by a private lender, but insured by the federal government. Although this particular type of loan was discontinued in 2010, it may still apply for some who are still working to pay off student debt.
Which Conditions Are Required by Your Lending Agency?
Private loans are often complex because they are funded by various companies with unique policies and conditions. While this doesn't mean that private loan forgiveness is an impossibility, it's crucial to know how your lender's specific requirements will impact the distribution of your student debt.
Biden's Student Loan Forgiveness Plan: Are You Eligible?
The outstanding federal loan balance in the U.S. is estimated at a whopping $1.62 trillion in 2022. Fortunately, an estimated 8 million Americans will be eligible for student loan forgiveness under the Biden-Harris Administration's student debt forgiveness plan.
Because Biden's plan was announced so recently, details have yet to surface regarding eligibility. Here's what we know so far:
- Individual applicants will have an annual income under $125,000 (or $250,000 for married couples).
- Qualified applicants are eligible for up to $10,000 in student loan forgiveness.
- Eligible borrowers who received a Pell Grant are eligible for up to $20,000 in student loan forgiveness.
As our country continues to adapt and evolve post-pandemic, it's important for you to stay up to date on how these changes impact your financial situation. Being proactive in creating an estate plan can help protect your loved ones from shouldering any outstanding debts you owe.
Don't wait to plan for the future. Call our firm at (805) 225-9058 to learn how student loan debt impacts your estate plan. Book your free consultation today.