US President Joe Biden unveiled his strategy to reduce student loan debt, which includes extending the pandemic-related payment moratorium and forgiving some borrowers' debt.
By extending current forgiveness programs for public sector employees, borrowers who are disabled, and students who were scammed by for-profit colleges, the Biden administration has already canceled roughly $32 billion of the $1.6 trillion in outstanding federal student debt.
The plan applies to federal student loan borrowers.
How much student loan will be canceled?
Whether the borrower obtained a Pell grant to pay for college affects the amount of debt that is forgiven.
The Federal Student Aid office of the Department of Education states that a federal Pell grant is only given to undergraduate students who "display exceptional financial need and have not earned a bachelor's, graduate, or professional degree" and "does not have to be repaid, except under certain circumstances."
Pell grants presently barely cover a third of the cost of a four-year public college degree, according to data cited by the White House, which has increased borrowing.
According to the FSA website, borrowers who did not get a Pell award as an undergraduate student and who make less than $125,000 annually as well as married couples or heads of households who make less than $250,000 annually may have up to $10,000 of their federal student loan debt erased.
Up to $20,000 of student loan debt will be forgiven for individuals who make less than $125,000 annually, married couples who make less than $250,000 annually, and heads of households who did receive a Pell award while an undergraduate student.
What steps do eligible borrowers have to take?
According to FSA, nearly 8 million borrowers might be eligible for automatic debt forgiveness because the Department of Education already has information about their income.
For borrowers to supply their income information or if borrowers are unsure if the department currently has their income information, the Biden administration will launch an application in the upcoming weeks.
The application will be accessible, according to the FSA, before the federal student loan repayment moratorium expires on December 31.
On the Department of Education's subscriptions page, borrowers can register to get notifications when the application is available.
How will future repayments for remaining debt work?
Repayment on student loans will once more be put on hold until December 31, 2022, with payments set to resume in January 2023.