President Joe Biden announced on Wednesday that student loan debt would be canceled for millions of Americans who earn less than $125,000 per year.
The announcement is the fulfillment of a campaign promise by Biden and caps months of wrangling over how much debt will be canceled and who would get the help.
Senate Minority Leader Mitch McConnell, R-Kentucky, condemned the plan as “a slap in the face to working Americans who sacrificed to pay their debt or made different career choices to avoid debt.
Here is what we know now about who is eligible for student loan debt cancellation.
Who is eligible?
- First, the student loan cancellation Biden is talking about applies to those who have taken a federally-backed student loan.
- The amount you receive is capped at the amount of outstanding debt. For example, if you owe $18,000 in student loan debt, you will receive $18,000, not $20,000.
- You are eligible for debt cancellation if your annual income is less than $125,000 (for individuals) or $250,000 (for married couples or heads of households).
- If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt cancellation.
- If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt cancellation.
What do I do to get the loan forgiveness?
- If the U.S. Department of Education has your income data, you will likely have to do nothing to get the debt forgiven. If the DOE doesn’t have your income data — or if you don’t know if they do — look for an online application in the coming weeks.
- If you would like to be notified when the application is open, sign up at the Department of Education subscription page.
When do student loan repayments start?
- Biden has extended the pause on student loans until Dec. 31, 2022. He says this is the last extension on those payments.
- However, Biden said that those with undergraduate loans would be able to cap their payments at 5% of their monthly income. The current income-driven plans mostly cap payments at 10% of a borrower’s discretionary income.
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