How to qualify for Biden’s new student loan forgiveness plan

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The Biden administration has already written off nearly $32 billion of the $1.6 trillion in outstanding federal student debt by expanding existing forgiveness programs for public sector workers, disabled borrowers, and students who were defrauded by for-profit colleges.

Here are details CNN has learned about Biden’s new plan, including how much will be forgiven and who is eligible.

The plan applies to borrowers of federal student loans.

How much forgiveness will they get?

The amount of debt canceled depends on whether the borrower received a Pell Grant to attend college. A federal Pell Grant is only awarded to undergraduate students who “show exceptional financial need and have not earned a bachelor’s, graduate, or professional degree” and “does not have to be repaid except under certain circumstances,” according to the Department of Education. Federal Office of Student Aid. According to data cited by the White House, Pell grants currently only cover a third of the cost of a four-year public college degree, which has led to a surge in lending.
Single borrowers making less than $125,000 a year and married couples or heads of households making less than $250,000 a year will have up to $10,000 forgiven of their federal student loan debt if they did not receive a Pell Grant as an undergraduate, according to the FSA website.

Single borrowers making less than $125,000 a year and married couples or heads of households making less than $250,000 a year but who received a Pell Grant as a college student will have up to $20,000 of their student loan debt forgiven.

What steps must eligible borrowers take?

Nearly 8 million borrowers can automatically receive debt forgiveness because the Department of Education already has their income information, the FSA says.

The Biden administration will launch a request in the coming weeks for borrowers to provide their income information or if borrowers are unsure if the department already has their income information. The app will be available in early October, a senior administration official told CNN. After a borrower completes the application, the person can expect student loan relief within four to six weeks, the official also said.

To receive notification when the application is open, borrowers can register at studentaid.gov.

FSA says the application will be available before the federal student loan repayment pause ends on December 31. Borrowers are encouraged to apply by November 15 to receive relief before the payment break expires, but the Department of Education will continue to process applications even after that. the pause expires, the official said.

Borrowers can sign up for updates on when the application opens on the Department of Education’s subscription page.

How will future payments on the remaining debt work?

Student loan repayment will be paused again until December 31, 2022, with payments beginning in January 2023.

The Biden administration is also proposing a rule to create a new income-based repayment plan in which borrowers pay no more than 5% of their monthly income on college student loans, a decrease from the current 10% threshold.

The rule would also increase the amount of income that is considered “nondiscretionary income,” so that no borrower earning less than 225% of the federal poverty level will have to make a monthly payment.

For borrowers with loan balances of $12,000 or less, loan balances would be forgiven after 10 years of payments instead of the current 20-year mark, under the proposed new income-based repayment plan.

And to help prevent a borrower’s loan balance from rising while the person is making monthly payments, under the proposed rule, the Biden administration would cover unpaid monthly interest, even if the monthly payment is $0 due to income level. of the borrower.

This story has been updated with additional information.

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