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How to Apply for Biden Student Loan Debt Forgiveness

After more than a year of speculation, President Joe Biden finally announced his plan on Wednesday to forgive a portion of student loans.

The plan has several components, and parts of it will take a while to implement, if they are ever enacted at all.

Many of the specific details aren’t yet available, but here’s what you need to know about the plan, whether you qualify for student loan forgiveness, and how to apply.

How much debt can I be forgiven?

If you are someone who earns less than $125,000, you can get up to $10,000 in federal student debt forgiven. If you’re married, you can each get a $10,000 discharge if your combined income is less than $250,000. (Cap is based on adjusted gross income and calculated on your 2020 or 2021 tax return).

To be clear, if you owe less than $10,000, you will only get your outstanding debt forgiven. It is not the case that if you owe, say, $7,000 the government will wipe it out and give you $3,000 as well.

What happens if I received a Pell Grant?

If you are below the income limit and receive a Pell Grant, the program established to help students from low-income families attend college, then you can get up to $20,000 of student debt forgiven.

The Biden administration says that almost all Pell Grant recipients come from families earning $60,000 or less a year, and that these borrowers generally have a harder time paying off their debt.

You probably know if you received a Pell Grant because you had to apply for the Free Application for Federal Student Aid, or FAFSA. But if you don’t remember, log in StudentAid.gov or search your inbox for anything about the FAFSA.

do i qualify for none debt forgiveness if I earn more than $125,000?

First of all, congratulations on your high salary! But unfortunately, no, you won’t qualify for any student debt forgiveness under Biden’s plan, which is aimed primarily at low- and middle-income people. (But read on, because your payments may soon drop!)

The White House still estimates that 43 million Americans below the income cap will enjoy some form of relief, including some 20 million people who will have their outstanding balance erased entirely.

Why is there an income limit? How is that fair?

Depends on your definition of fair, I guess. The administration has been under pressure from all sides over the debt plan, including from people who didn’t want Biden to write off any student debt because they think it’s unfair or could make inflation worse. People also didn’t want to help richer people into better paying jobs.

But Biden has been trying to find a happy medium where he can help low- and middle-income Americans. He also wanted to promote racial equality, given that black graduates are disproportionately affected by student debt, owing to an average of $25,000 more than white graduates.

“It’s really hard to overstate how important this is to America’s middle class and to our economy,” a senior administration official told reporters. “This announcement will help people who generally come from working families and are now working class.”

What types of loans are covered?

Only federal loans issued by the Department of Education are covered by this plan. That includes Parent Plus loans that your parents may have taken out in your name. You may check who your loan servicer is here.

If you have loans from private lenders, then you are not eligible.

What if I never graduated?

You are still eligible. In fact, Biden seemed to indicate that the plan was specifically aimed at you. Nearly a third of borrowers have debt but no title to show it, a situation the president described as “the worst of both worlds.”

Does my graduate student debt qualify for forgiveness?

Yes, loans you took out to go to graduate school count as long as you meet the other criteria (ie, they’re federal loans and you earn less than $125,000).

I am a current college student. Do I qualify?

Yes, as long as you have taken out your loan before July 1 of this year.

If you are a dependent (meaning you are still living with your parents), your eligibility will also be determined based on the income limits described above ($125,000 for a single-parent household or $250,000 for married parents). If you are self-employed, it is determined through your own income.

What happens if I previously defaulted on my loans?

Are you okay. The White House previously announced in April that people who defaulted or were behind on payments before the pandemic paused loan repayments will automatically be brought into compliance with a “new beginning” when payments finally resume. If your loans were over $10,000, you’ll still have this fresh start and you’ll be able to sign up for a payment plan for the rest.

Will I owe taxes on the forgiven amount?

Nope! Typically, when student debt is forgiven, it’s added to your taxable income and could put you in a higher federal tax bracket, but thanks to a provision included in the American Bailout Act, which was passed in March 2021 To help Americans with COVID relief, there are no taxes on any forgiven student debt through 2025.

Do I have to apply for forgiveness or will it be automatic?

officials estimate that approximately 8 million borrowers had already shared income information with the Department of Education, which means that for these people the relief will be automatic.

For everyone else (or if you forgot if you shared your income information), officials say that within the next few weeks they will develop an application for you to fill out. If you want to be notified when it goes live (it will be before payments resume on January 1), you can sign up here to be notified.

It’s also probably a good idea to make sure your contact information is up to date with your loan servicer.

I already paid off my loans. Do I have any relief?

No, sorry

But if you’ve made any payments since officials suspended them in March 2020, you can request a refund on those amounts from your loan providers if you contact them.

When will forgiveness occur?

That is not clear. Biden’s plan is likely to face legal challenges from opponents who say he doesn’t have the power to pay off this debt (although there’s no immediate word on who could go to court to make such a challenge), so the timeline is a little cloudy In this point.

I do not qualify for any debt forgiveness. So what about my loans?

I’m sorry to hear that, but there is good news.

First, the pandemic pause on loan payments was last extended until December 1. 31, so you have a few months. As before, you don’t need to do anything because this pause is automatic.

Second, Biden has also proposed a new rule that would reform the income-based payment system. If you sign up for one of these plans, there is a cap on the amount you will pay each month based on a percentage of your discretionary, or disposable, income, and Biden is lowering this cap to 5% from 10% to 15% for loans. undergraduate (for graduate debt, it will be capped at 10%). Any outstanding debt will also be automatically forgiven after 20 years of payments or 10 years if your balance is $12,000 or less.

For people with low incomes, they will also increase the amount of income that is considered non-discretionary (and therefore protected from repayment) to ensure that no borrower earns less than 225% of the federal poverty level (approximately the annual equivalent of a minimum wage of $15) has to make payments.

Also, your loan balance will not increase as long as you continue to make monthly payments because this new plan will cover any unpaid monthly interest. If your income is too low to make payments (as described above), this will still apply to you.

These new rules will take about a year to implement, so they should be in place next summer.

I am a public servant. What do I get out of this?

Thanks for your service! If you work for a federal, state, local, or tribal government, or are a member of the military or certain nonprofit organizations, you may be eligible for the Public Service Loan Forgiveness Program, which allows you to obtain credit for loan forgiveness. The administration has said that its plan will facilitate this process and is already relaxed the rules. You must submit your application before November 1.

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