Who qualifies for Biden’s ‘unprecedented’ $20,000 student loan forgiveness? When will the cancellation take place? Here’s what we know so far

Have questions about the student loan relief plan the Biden administration unveiled Wednesday? Please email them to reporter Alicia Adamczyk at alicia.adamczyk@fortune.com.

On Wednesday, after months of anticipation, President Joe Biden announced his plan for broad student debt relief. Millions of federal borrowers will receive up to $20,000 in debt relief, depending on their income and loan type.

In addition to the loan forgiveness, Biden also extended the moratorium on student loan payments for the last time. Borrowers will not have to pay their monthly loan bills until January 2023.

There are still many unknowns about the student debt relief plan and how it will work, including a timeline for when borrowers can expect to see their balances shrink.

But the U.S. Department of Education and other student loan experts were able to answer some of them Luckhis questions about Biden’s plan. Here’s what we know so far.

Who qualifies for student loan forgiveness?

Borrowers who took out most types of federal loans before July 2022 are eligible for forgiveness if they — or their parents, if they’re dependents — earned less than $125,000 in the 2020 or 2021 tax year. For married couples who file taxes jointly and heads of household, The income limit doubles to $250,000.

Borrowers with the highest income do not qualify for forgiveness.

Which loans qualify for write-off?

Federal undergraduate, graduate, Parent PLUS and Pell Grants count toward the forgiveness plan.

Borrowers with Pell grants who meet income limits can qualify for up to $20,000 in relief, while other borrowers qualify for up to $10,000. Relief is limited to the amount of debt each borrower has. So, if you qualify for $20,000 in debt relief but have a balance of $5,000, you will receive $5,000 in forgiveness.

Loans must have been originated before July 2022 to qualify for write-off. This means that those still in school can reduce their balances.

Private loans—those held by banks or other financial institutions, not the Department of Education—will not be forgiven.

Do today’s students qualify for forgiveness?

Yes. But if your parents or guardians claim you as a dependent on their tax returns, then their income will be used to determine eligibility.

Do non-graduates qualify for forgiveness?

Yes. Provided you meet all other eligibility requirements.

How many people will be eligible for forgiveness?

The White House says that if “all borrowers claim the relief they’re entitled to,” 43 million people will get student debt forgiveness. Twenty million people will have their balance completely wiped out.

How do borrowers apply for student loan forgiveness?

Borrowers will have to apply for forgiveness, according to the Department of Education. By the end of the year, a form will be available for borrowers to certify their income.

The department also said it has the income information of some borrowers and that 8 million borrowers could have their loans automatically forgiven without having to fill out the form. While it’s not immediately clear who those borrowers are, it could include people who have an income-based repayment plan and have already submitted their income information to the Department of Education for certification, says Betsy Mayotte, president and founder of The Institute of Student Loan. Advisors and longtime student loan attorney.

It’s possible that borrowers whose income information the Department of Education already has will see their debt canceled sooner than other borrowers, Mayotte says. That said, more information will be available on this in the coming weeks.

To be notified by the Department of Education when an application is open, you can sign up for federal student loan borrower updates online.

How will student loan forgiveness affect your taxes?

You won’t have to pay taxes on any loans that are forgiven. At least not at the federal level. A provision of the 2021 American Rescue Plan (ARP) precludes student loan cancellation from being taxed as federal income, as is typical of many types of forgiveness under normal circumstances.

Which states will benefit the most from student loan forgiveness?

Total federal student loan debt in the U.S. is about $1.6 trillion, according to the most recent data provided by the Department of Education’s Federal Student Aid Office. Nationally, the average for borrowers is $37,667, but these figures vary when you consider location and degree type.

Borrowers in Maryland and Georgia also owe significantly more than the national average, at $43,619 and $42,200, respectively, per borrower. North Dakota had the lowest average balance, at $29,885.

Check out this interactive chart on Fortune.com

When will borrowers see their loan forgiven?

It will take some time, says Mayotte. And there are sure to be headaches for some borrowers along the way. The government – and certainly the Ministry of Education – has never before undertaken this kind of forgiveness effort.

“This is a big project. It’s not going to happen tomorrow and it’s not going to end all at once,” he says. “It could take six months or more, and there will be no way to push yourself in line. They will do it in batches and do it as quickly as they reasonably can.”

Borrowers should also be on the lookout for scams in the coming months.

“You won’t have to pay a fee to get the pardon,” says Mayotte. “You’re not going to get a phone call from a legitimate source to get a faster pardon. If they call or email you to get a Biden pardon, you should do whatever you can to make their lives miserable.”

If you suspect a scam, report it to the Federal Trade Commission or your state’s Attorney General. And monitor studentaid.gov and your provider’s website for updates.

When will payments resume for borrowers who still have debt?

Not until January at the earliest. Borrowers should watch for a charge-off notice at least three weeks before resuming payments.

You can also check in with your server or log into your online account to see when payments are scheduled to resume (once these sites are back up and running, of course).

Will forgiveness really happen?

Opponents of the plan are likely to sue to stop the cancellation. It’s not immediately clear that Biden has the constitutional authority to enact it himself, says Jacob Channel, an economist at Student Loan Hero.

“The reality is that we’re in a pretty unprecedented situation. There’s never really been this widespread student loan write-off in the history of student loans in the US,” Channel says. “I predict there will be quite a heated debate on the matter in the coming weeks and months. We’re all in the dark together.”

Usually, an act of Congress is required to address or change the student loan system.

That said, Channel says he wouldn’t want to be the one to challenge debt relief.

“If you’re a politician, it might not be very helpful to go to somebody and say, ‘You know you got $10,000 in loan forgiveness yesterday?’ I don’t think you should have that,” he says.

What else should borrowers know?

Borrowers who made payments on their federal student loans during the COVID pause are eligible to receive a refund of that money, according to Federal Student Aid. If you made payments that could qualify for forgiveness, it might be smart to get a refund and keep more cash in your pocket. Call your service for more information.

In addition, the Department of Education announced a plan to create a new income-based repayment plan that caps bills at 5% of a borrower’s discretionary income, compared to the current 10%. It would also forgive the borrower’s balance after 10 years for borrowers with an original loan balance of $12,000 or less, as opposed to the current 20 to 25. Interest would not accrue while the borrower makes payments.

The White House estimates that this would reduce the average annual student loan payment “by more than $1,000 for both current and future borrowers.”

What Happened to Public Service Loan Forgiveness?

The Department for Education has also provided a new summary of plans for the Public Service Loan Forgiveness (PSLF) scheme going forward.

Under the new program, more types of payments will count toward PSLF (currently, only those made on time and in full under certain payment programs qualify).

This is based on changes the department has already made to the program. In October 2021, a limited waiver was announced that allows borrowers in the PSLF track to count all of their payments toward forgiveness, even those made on the “wrong” payment plan, incomplete payments, and late payments. Non-payments made during the current payment suspension also count towards the 120 required for forgiveness.

An extension of PSLF exemption was not included. Loans must still be consolidated by the October 31, 2022 deadline to qualify for the initial waiver. So far, 175,000 borrowers have been forgiven under the waiver, canceling more than $10 billion in debt, according to the Department of Education.

This is a developing story. Check back later for more details.

This story was originally featured on Fortune.com

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