Here are details CNN has learned about Biden’s new plan, including how many will be forgiven and who is eligible. The plan applies to federal student loan borrowers.
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 given only to undergraduate students who “demonstrate exceptional financial need and have not earned a bachelor’s, master’s or professional degree” and “does not have to be repaid, except in certain circumstances,” according to the Department of Education’s Federal Office of Student Aid. According to data cited by the White House, Pell grants currently cover only a third of the cost of a four-year public college degree, which has led to increased borrowing. Single borrowers making less than $125,000 a year and married couples or heads of households making less than $250,000 a year would have $10,000 of their federal student debt forgiven if they didn’t receive a Pell Grant as an undergraduate, according to the FSA website . Single borrowers who make less than $125,000 a year and married couples or heads of households who make less than $250,000 a year but received a Pell grant as an undergraduate will have up to $20,000 of their student loan debt forgiven.
What steps should eligible borrowers take?
Almost 8 million borrowers may be able to get debt relief automatically because the Department for 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 whether the department already has their income information. The FSA says the app will be available before the federal student loan repayment moratorium ends on Dec. 31. Borrowers can sign up for updates on when the application is open on the Department of Education’s subscription page.
How will future repayments work for the remaining debt?
Student loan repayment will be put on hold again until December 31, 2022, with repayment starting in January 2023. The Biden administration is also proposing a rule to create a new income-driven repayment plan in which borrowers pay no more than 5 percent of their monthly income on undergraduate loans, down from the current limit of 10 percent. The rule would also increase the amount of income that is considered “nondiscretionary income,” so no borrower earning below 225% of the federal poverty level would 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 limit, under the proposed new income-based repayment plan. And to prevent a borrower’s loan balance from growing while the person makes monthly payments, under the proposed rule, the Biden administration would cover unpaid monthly interest even if the monthly payment is $0 because of the borrower’s income level. This story has been updated with additional information. CNN’s Katie Lobosco contributed to this report.
