Who qualifies for US student debt forgiveness?

() — The administration of President Joe Biden has taken the first steps to launch the plan that forgives student debt to certain borrowers, sending email updates on the process before the application window opens next October. had access to one of the emails sent this Thursday by the Department of Education where more details are known about who is eligible and what to expect in the process.

Biden announced in August his plan to give millions of indebted young people who are saddled with sky-high student loans a reprieve. The measure cancels up to $10,000 of student debt for people making less than $125,000 a year or up to $20,000 for eligible borrowers who are also Pell Grant recipients.

The Biden administration has already written off nearly $32 billion of the $1.6 trillion in outstanding federal student debt by expanding existing forgiveness programs for public sector workers, disabled borrowers and students who were swindled by colleges for financial gain. profit.

Here are the details has compiled about Biden’s new plan, including how much will be forgiven and who is eligible.

Who qualifies?

The plan applies to borrowers or debtors of federal student loans.

How much financial relief will they get?

The amount of debt forgiven depends on whether the borrower received a pell grant to attend college. A federal Pell Grant is only awarded to college students who “show exceptional financial need and have not earned a bachelor’s, graduate, or professional degree” and “does not have to be repaid, except in certain circumstances,” according to the Federal Aid office. for Students (FSA, for its acronym in English) of the Department of Education.

Single borrowers making less than $125,000 a year and married couples or heads of households making less than $250,000 a year will have up to $10,000 of their federal student loan debt forgiven if they did not receive a Pell Grant as a college student, according to the FSA website.

Single borrowers making less than $125,000 a year and married couples or heads of households making less than $250,000 a year but who received a Pell Grant as a college student will have up to $20,000 of their debt forgiven. student loan.

What steps must eligible borrowers take?

Nearly 8 million borrowers can automatically receive debt forgiveness because the Department of Education already has their income information, the FSA says.

An email from the Department of Education sent to Americans who have signed up for updates and obtained by on Thursday offered some details about who is eligible and what to expect in the process.

“In October, the US Department of Education will launch a short online application for student debt relief. You will not need to upload any supporting documents or use your FSA ID to submit your application,” the email says.

He continued: “Once you submit your application, we will review it, determine your eligibility for debt relief, and work with your loan servicer(s) to process your relief. We will contact you if we need any additional information.”

The email said additional updates would be sent “in the coming days,” but did not provide a specific October date for when the application process would open. It will run until December 2023. He also warned borrowers to “beware of scams.”

“A company may contact you and say they will help you get loan discharge, forgiveness, or debt relief for a fee. You will never have to pay for aid with your federal student aid. Be sure to work only with the US Department of Education and our loan servicers, and never reveal your personal information or account password to anyone,” he said.

Borrowers will need to provide their income information on the application or if they are unsure if the department has their income information. FSA says the application will be available before the federal student loan payment freeze ends on Dec. 31.

Borrowers can sign up to receive updates on when the application opens on the subscription page of the Department of Education.

How will future payments on the remaining debt work?

Student loan repayment will be frozen again until December 31, 2022, with payments beginning in January 2023.

The government is also proposing a rule to create a new income-based repayment plan so that borrowers pay no more than 5% of their monthly income on college loans, down from the current 10% threshold.

The rule would also increase the amount of income that is considered “nondiscretionary income,” so that no borrower earning less than 225% of the federal poverty level will 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 mark, under the proposed new income-based repayment plan.

And to help prevent a borrower’s loan balance from rising while the individual is making monthly payments, under the proposed rule, the Biden administration would cover unpaid monthly interest, even if the monthly payment is $0 due to the level of borrower’s income.

‘s Katie Lobosco, Betsy Klein and MJ Lee contributed to this report.