President Biden’s announcement of a sweeping bid to waive federal student loans — up to $20,000 for Pell Grant recipients and up to $10,000 for others who qualify — leaves millions of borrowers with unanswered questions, and some details won’t be clear. are for weeks or months.
Here are three big questions borrowers may have:
1. Who gets loan forgiveness?
Americans currently owe about $1.62 trillion in federal student loans. Biden’s plan will provide relief for most of them – 43 million borrowers – and completely eliminate student debt of about 20 million.
But who qualifies?
Individuals with federal student loans earning less than $125,000 per year, or couples earning less than $250,000, are eligible for up to $10,000 in forgiveness.
This also applies to current students: Borrowers who are dependent students are eligible for an allowance based on their parents’ income. Parent PLUS loans, which are federal loans for parents of undergraduate students, are also eligible under the president’s plan. (Loans taken after June 30, 2022 are not eligible.)
Qualified borrowers who have received Pell Grants are eligible for additional exemption – up to $20,000.
According to the White House, about 60% of federal student loan borrowers received Pell Grants. These scholarships are designed to help low-income students pay for higher education, and about one-third of federal student loan students receive Pell Grants each year.
2. Do I have to apply?
Many borrowers, while excited about the news, want to know what comes next. The White House said that to take advantage, most borrowers will have to apply to verify their income. The Department of Education said nearly 8 million borrowers already have income data and should qualify for automatic debt forgiveness.
For those 8 million borrowers, that relief may come very soon. And the timetable for the remaining borrowers – about 35 million of them?
“That’s the million dollar question,” Education Secretary Miguel Cardona told NPR’s Mary Louise Kelly.
“We’re improving a system that was broken and outdated,” he said, adding that it will take time for the process to run smoothly. Cardona urged borrowers to go to for more information and to sign up for automated emails that will provide updates.
3. Will my monthly payments go down?
An unexpected part of Biden’s announcement is a revised plan for what’s known as income-driven repayment (IDR), designed to help people who can’t afford to make large monthly payments.
Biden’s IDR plan reduces the amount borrowers must contribute each month – from 10% of their discretionary income to 5%. It will also increase the amount of income that is considered non-discretionary, providing more assistance.
While the announcement of Biden’s loan waiver brings immediate relief to many borrowers, Dominique Baker, an associate professor of educational policy at Southern Methodist University, says these changes in IDR could bring benefits for years to come. “If we’re talking about a major reform of the student loan system, this would be one of those things,” she said. “This is a good first step.”