The Biden administration is canceling a portion of federal student loan debt and delaying the date that people must resume paying their student loans. Here’s how to find out if you qualify and what you need to do to claim relief.
Who is eligible?
The program only applies to federal student loans. The Department of Education will cancel up to $20,000 in student loan debt for people who went to college with Pell Grants and up to $10,000 for those who did not receive Pell Grants. Individuals are eligible if their individual income is less than $125,000 per year or $250,000 for a married couple.
If everyone who is eligible participates, it would cover 43 million borrowers, erasing the remaining debt for 20 million of them, the White House said. And the relief is not considered taxable income for federal income tax purposes.
What is a Pell Grant?
These are loans for undergraduate students based on information they submit through the Free Application for Federal Student Aid (Fafsa). Pell Grants are awarded based on financial need, taking into account the cost of schooling, the family’s expected financial contribution and other factors. The maximum Federal Pell Grant award for an individual for the 2022-23 school year (July 1, 2022 to June 30, 2023) is $6,895.
Nationally, about one-third of undergraduate students receive Pell grants. The Education Data Initiative said the average Pell grant is $4,491, and just over half the recipients come from families earning less than $20,000 a year.
Do current students with federal loans qualify?
Yes, if they meet the income eligibility requirements. Dependent students are entitled to relief based on their parents’ income, not their own.
What if I don’t remember what loans I got?
If you can’t remember what kind of federal student loan you got or want to check, the website is studentaid.gov. You may need to create an account.
The Ministry of Education estimated that 21% of those eligible for debt forgiveness are 25 years of age or older and 44% are 26-39 years of age. Over a third are aged 40 and over and 5% are senior citizens.
What do I need to do to claim this debt relief?
The White House said nearly eight million borrowers could get relief automatically because their income data is already available to the Department of Education. If people don’t know if they qualify, the Department of Education will make an application available before the end of the pause on federal student loan repayments on Dec. 31.
Are there other ways to qualify for debt relief?
Yes. Borrowers who work for nonprofit organizations, the military, or federal, state, tribal, or local governments could also qualify for student loan forgiveness through the Biden administration’s Public Service Loan Forgiveness (PSLF) program. However, these temporary changes expire on October 31, so people need to apply before then.
What if I can’t afford the monthly payment on my remaining student loans?
People with undergraduate college loans can repay 5 percent of their discretionary income, Biden said. This is down from the previous cap of 10%. The program also increases the amount of income considered nondiscretionary and cancels balances after 10 years for people who had original loan balances of $12,000 or less.
What happens to my student loan repayments that were scheduled to resume in September?
People have not been required to make payments on their student loan debt since the pandemic began in March 2020. Biden has extended it four times and on Wednesday extended it again for what he said was the last time. People won’t have to start making payments again until January 2023.
How much will all this debt relief cost?
The University of Pennsylvania’s Wharton School estimated this week that forgiving $10,000 for each borrower in a federal student loan with income caps could cost about $300 billion over 10 years.
Write to Janet H. Cho at firstname.lastname@example.org