If you are one of the millions of Americans who have federal student loans, you may be wondering what President Biden’s plan for student loan forgiveness means for you. In this post, we will explain the key features and benefits of Biden’s student loan forgiveness plan and how you can qualify and apply for it.
What is Biden’s Student Loan Forgiveness Plan?
Biden’s student loan forgiveness plan is a three-part plan that aims to provide more relief and support to federal student loan borrowers who need it most. The plan was announced in August 2022 and includes the following components
- Loan forgiveness of up to $10,000 for low- to middle-income borrowers This component will cancel up to $10,000 of student debt for borrowers who earn less than $125,000 per year and who have federal direct loans or Federal Family Education Loans (FFEL) that are owned by the Department of Education. This will benefit about 15 million borrowers, and wipe out the debt of about 5 million borrowers completely.
- Loan forgiveness is available for borrowers who work in public service or education. This component will expand and improve the Public Service Loan Forgiveness (PSLF) program, which forgives the remaining balance of federal direct loans after 10 years of qualifying payments and employment in the public service or nonprofit sectors. The plan will make the program more accessible and generous, by allowing borrowers to receive $10,000 of forgiveness for every year of service, up to five years, and by simplifying the application and verification process.
- Loan forgiveness is available for borrowers who are on income-driven repayment plans. This component will reform and streamline the income-driven repayment (IDR) plans, which cap monthly payments at a percentage of the borrower’s income and forgive the remaining balance after 20 or 25 years of payments. The plan will reduce the number of IDR plans from four to one and make the new plan more affordable and flexible by lowering the monthly payment cap from 10% to 5% of the borrower’s discretionary income and by excluding forgiven amounts from taxable income.
How to Qualify and Apply for Biden’s Student Loan Forgiveness Plan?
To qualify and apply for Biden’s student loan forgiveness plan, you need to meet the following criteria and follow the following steps:
- For loan forgiveness of up to $10,000 for low- to middle-income borrowers:
- You need to have federal direct loans or FFEL loans that are owned by the Department of Education. You can check the ownership of your loans by logging into your account at StudentAid.gov or by contacting your loan servicer.
- You need to have an adjusted gross income (AGI) of less than $125,000 per year. You can find your AGI on your most recent tax return or by using the [IRS Free File] tool.
- You need to apply for the forgiveness by filling out and submitting the [Biden Student Loan Forgiveness Application] online or by mail. You will need to provide your personal and financial information, and attach a copy of your tax return or other proof of income.
- For loan forgiveness for borrowers who work in public service or education:
- You need to have federal direct loans. If you have FFEL loans or Perkins loans, you can consolidate them into a direct consolidation loan to qualify for the program. You can apply for consolidation at StudentAid.gov.
- You need to work full-time in a qualifying public service or nonprofit job. This includes federal, state, local, or tribal government agencies, or 501©(3) organizations, or other types of organizations that provide certain public services. You can find a list of qualifying employers and services at StudentAid.gov.
- You need to make 120 qualifying monthly payments on your loans while working a qualifying job. Qualifying payments are payments made under an IDR plan or the standard 10-year repayment plan and must be made on time and in full. You can track your payments by submitting the [Employment Certification Form] annually or whenever you change employers.
- You need to apply for the forgiveness by submitting the [PSLF Application] after you have made 120 qualifying payments. You will need to provide your personal and loan information, and attach a copy of your most recent Employment Certification Form.
- For loan forgiveness for borrowers who are in income-driven repayment plans:
- You need to have federal direct loans or direct consolidation loans. If you have FFEL loans or Perkins loans, you can consolidate them into a direct consolidation loan to qualify for the program. You can apply for consolidation at StudentAid.gov.
- You need to enroll in the new IDR plan, which will be available in 2023. You can apply for the plan at StudentAid.gov or by contacting your loan servicer. You will need to provide your personal and financial information, and recertify your income and family size annually.
- You need to make 240 or 300 qualifying monthly payments on your loans under the new IDR plan, depending on your loan type and when you borrowed. Qualifying payments are payments that are made on time and in full, or payments that are $0 due to your low income. You can track your payments by logging into your account at StudentAid.gov or by contacting your loan servicer.
- You do not need to apply for the forgiveness, as it will be automatically granted after you have made the required number of payments. You will receive a notification from your loan servicer when your loans are forgiven.
Conclusion
Biden’s student loan forgiveness plan is a major step toward making higher education more affordable and accessible for millions of Americans. By providing targeted and generous debt relief to borrowers who need it most, the plan will help reduce the burden of student debt and improve the economic and social outcomes of borrowers and their families.
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