President Joe Biden announced on Wednesday that millions of people will have their federal student loan debt forgiven, some by as much as $20,000.
The program has drawn praise and criticism. Florida Gov. Ron DeSantis says the plan forces “a truck driver to pay a loan for someone who got a PhD in gender studies.”
Sen. Sheldon Whitehouse, D-Rhode Island, responded to Biden’s announcement on Wednesday tweeting that the cancellation of “10k in student loan debt and 20K for Pell grant recipients is a step in the right direction ... .”
Earlier this year Whitehouse introduced the Zero-Percent Student Loan Refinancing Act, which would allow Americans to refinance their federal student loans at a zero percent interest rate.
While Biden’s program will forgive student loan debt for some, it is not for everyone. Here is a look at how the program is designed to work.
Who is qualified for the debt cancellation?
- A person must earn less than $125,000 to qualify for $10,000 in debt cancellation, $250,000 if you are married and file your taxes jointly or file taxes as a head of household.
- The income amounts are based on your adjusted gross income.
- If you meet those income requirements and received a Pell Grant, you could qualify for an additional $10,000 in debt cancellation.
- If you did not earn a degree, you are still eligible to have your debt canceled.
- If your loan was in default, you are still eligible for the debt cancellation.
How do you know if my loan is eligible?
- Only federal student loan debt is eligible. PLUS loans, whether parents or graduate students took them out, are also eligible.
- Loans obtained after June 30 are not eligible for relief.
Which loans are not eligible to be canceled?
- Private loans are not eligible.
- Most Federal Family Education Loans or FFEL loans are not eligible. If the loan was not eligible for the payment pause, then it is not eligible to be canceled.
Do you have to sign up to get the debt forgiveness?
According to the Department of Education, if you are enrolled in an income-driven repayment plan and have submitted your most recent tax return, you should not need to do anything else because your loan server should have your information.
If you don’t know who your loan server is, you can find out here.
Once you know who your server is, you can make sure they have your information. Make sure they have your postal address, email address and phone number.
The DOE will set up an application process by the end of the year. Around 8 million people should have their debts canceled automatically, since their loan server has the needed information.
How will you know when the debt has been forgiven?
You should receive a message from your loan servicer when your debt drops or goes to zero.
What happens to my payments if I owe more than the $10,000 or $20,000 in debt forgiveness?
- If you still have student loan debt after the $10,000 or $20,000 debt forgiveness, you will receive a notice sometime in early December about the status of that debt. Payments on federal loan debt that have been canceled because of the COVID-19 pandemic will begin again on Jan. 1, 2023.
- If you do not receive a notice, you can always contact your loan server for information.
- If you do receive the debt forgiveness, your server may not recalculate the payments to a lower payment, but you can request to have the payments spread out over the remaining loan term.
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