The Biden administration is canceling some of the federal student loan debt and pushing back the date when people need to resume payments on 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 write off up to $20,000 in student loan debt for people who went to college on Pell Grants and up to $10,000 for those who did not receive Pell Grants. People are eligible if their individual income is less than $125,000 a year, or $250,000 for a couple.
If all those eligible participate, it will cover 43 million borrowers, eliminating the remaining debt of 20 million of them, the White House said. And relief is not considered taxable income for federal income tax purposes.
What is a Pell Grant?
These are loans for undergraduates 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 school, the expected financial contribution of the family, and other factors. The maximum Federal Pell Grant award for an individual for the 2022-23 school year (July 1, 2022 – June 30, 2023) is $6,895.
Nationwide, about a third of undergraduate students receive Pell Grants. The Education Data Initiative said the average Pell Grant is $4,491, and just over half of the recipients are from families earning less than $20,000 a year.
Do current students with federal loans qualify?
Yes, as long as they meet the income eligibility requirements. Dependent students are eligible for relief based on their parents’ income rather than their own.
What if I don’t remember the loans I got?
If you can’t remember what type of federal student loan you got, or want to check, the website is studentaid.gov. You may have to set up an account.
The Department of Education estimated that 21% of those eligible for debt cancellation are 25 years old or younger and 44% are 26-39 years old. More than a third are 40 years old or older and 5% are elderly.
What do I have to do to claim this debt relief?
The White House said nearly eight million borrowers can automatically receive relief because their income data is now 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 pause on federal student loan payments ends on December 31.
Are there other ways to qualify for debt relief?
Yup. Borrowers who work for nonprofits, the military, or federal, state, tribal, or local governments may also qualify to have their student loans forgiven through the Biden administration’s Public Service Loan Forgiveness (PSLF) program. But these temporary changes expire on October 31st, so people should apply before then.
What if I can’t pay the monthly payment on my remaining student loans?
People with undergraduate college loans can limit payments to 5% of their discretionary income, Biden said. This is below the previous threshold of 10%. The plan also increases the amount of non-discretionary income and cancels balances after 10 years for people who had original loan balances of $12,000 or less.
What happens to my student loan payments that were scheduled to resume in September?
People have not had to make payments on their student loan debt since the pandemic began in March 2020. Biden extended this four times and on Wednesday extended it again for what he said would be the last time. People won’t need to start making payments again until January 2023.
How much will all this debt relief cost?
The Wharton School at the University of Pennsylvania estimated this week that forgiving $10,000 to each borrower of federal student loans with income ceilings could cost about $300 billion over 10 years.
Write to Janet H. Cho at email@example.com