The Biden administration released projections today on the anticipated impact of its sweeping new student loan forgiveness initiative. According to data compiled by the Education Department, 40 million federal student loan borrowers across all 50 states will get at least some portion of their loan balances forgiven under Biden’s new plan. Of those, half will have their federal student loans completely eliminated.
Here are the details.
Biden’s Student Loan Forgiveness Plan
Under Biden’s one-time student loan cancellation initiative, borrowers with government-held federal student loans will soon be eligible for up to $20,000 in federal student loan forgiveness. Borrowers who received Pell Grants as part of their financial aid packages can receive up to the full $20,000 amount in loan forgiveness, while borrowers who did not receive Pell Grants would be eligible for up to $10,000 in loan forgiveness. Pell Grants are a form of federal financial aid that borrowers are not required to pay back.
Government-held federal student loans, including all Direct loans and federally-managed FFEL loans, can qualify, including graduate student loans and Parent PLUS loans. Commercially-held FFEL loans do not qualify for loan forgiveness, but the Education Department is working on possible solutions. Borrowers can also consider consolidating commercially-held FFEL loans into a Direct consolidation loan to qualify (although borrowers must decide whether or not that makes sense, based on their own unique circumstances).
Eligibility for the student loan forgiveness relief is restricted based on a borrower’s income. To qualify, borrowers must have earned less than $125,000 (or less than $250,000 if they are married) in either 2020 or 2021.
Education Department Releases Projections on Biden’s Student Loan Forgiveness Plan
According to a new White House fact sheet, the Biden administration “expects that over 40 million borrowers are eligible for its student debt relief plan, and nearly 20 million borrowers could see their entire remaining balance discharged.”
The administration anticipates that the vast majority of the student loan forgiveness relief will go to borrowers making less than $75,000 per year, many of whom received Pell Grants. “Nearly 71% of Black undergraduate borrowers are Pell Grant recipients, and 65% of Latino undergraduate borrowers are Pell Grant recipients,” notes the White House. Advocates for broad student loan forgiveness have often framed the issue as a matter of racial justice, as Black and Latino students are more likely to rely on student debt — and have more difficulty paying it back — as compared to White students when pursuing a college education.
The Education Department anticipates that borrowers in all 50 states will benefit from the student loan forgiveness initiative, with much of the relief flowing to the nation’s most populous states including California (over 3.5 million borrowers projected to be eligible), Texas (over 3.3 million borrowers projected to be eligible), and Florida (over 2.4 million borrowers projected to be eligible).
How to Apply for Biden’s New Student Loan Forgiveness Initiative
The Education Department will be releasing a formal application for Biden’s one-time student loan forgiveness initiative in early October, according to officials. The application should be accessible on StudentAid.gov, the Education Department’s web portal for borrowers. While some of the relief will be provided automatically for borrowers who have recent income information already on file with the Education Department, officials encourage all borrowers to submit an application.
Federal Student Aid officials anticipate a turnaround time of four to six weeks after a borrower submits an application. While borrowers will have until December 31, 2023 to apply, officials encourage borrowers to submit the application by November 15, 2022 to ensure processing before the end of this year, which is when the ongoing student loan payment pause is set to expire. Some borrowers will see a reduction in their monthly payments following the application of the student loan forgivenes award as the Education Department re-amortizes their balances.
Borrowers can learn more about Biden’s one-time student loan forgiveness initiative here.