In late 2022, the Biden administration announced its plan to tackle the soaring student loan debt in the United States. While the plan contained several strategies to help reduce student loan burdens, the most notable was forgiveness of as much as $20,000 in student loan debt for all eligible borrowers.
But what exactly is an eligible borrower? To qualify for Biden's student loan forgiveness, you must meet certain criteria.
Image source: Getty Images.
Before we get into the details, it's important to emphasize that nobody qualifies for student loan forgiveness -- yet. The legality of Biden's student loan forgiveness plan has been challenged by several states, and those challenges are currently making their way through the Supreme Court. The Supreme Court is expected to rule on the forgiveness plan in the coming months, so any qualifications discussed here will be contingent on a positive outcome.
That said, here's a rundown of the qualification requirements for the President's plan to forgive as much as $20,000 of student debt per borrower and what other provisions you might benefit from.
Do you qualify for student loan forgiveness?
President Biden's student loan forgiveness plan provides up to $10,000 of student debt relief to most federal student loan borrowers or as much as $20,000 to borrowers who received a Pell Grant. For example, if you did not receive a Pell Grant and have $32,000 in federal student loan debt, this forgiveness plan could reduce the amount you owe to $22,000.
However, not everyone qualifies. Borrowers must meet some specific qualifications to receive loan forgiveness.
The most significant requirement is that you qualify based on your income; your adjusted gross income (AGI) must be below $125,000 if you file taxes as single or married filing separately or $250,000 for any other filing status. And you can use your AGI from either 2020 or 2021 to qualify.
It's worth noting that students still classified as dependents are eligible for loan forgiveness, but it will be based on the parents' income.
In addition to the income qualification:
- Your student loans must be federal student loans. Private loans are ineligible. But all types of federal student loans -- including parent PLUS and even defaulted loans -- are eligible for debt relief.
- Your loans must have been disbursed on or before June 30, 2022. In other words, if you are a freshman in college now and got your first loan in Fall 2022, you are ineligible.
- You need to apply. It's important to point out that Biden's forgiveness plan isn't automatic for all borrowers. It is for some borrowers whose income information is already on file with the Department of Education. But unless you receive notice that this is the case, you should fill out the application once it becomes available (dependent upon whether the Supreme Court permits the forgiveness plan to proceed).
You might qualify for other relief measures
As mentioned, student loan forgiveness was only one part of Biden's student loan plan. Even if you don't qualify for debt forgiveness, other provisions could make your student loans less burdensome. And it's important to point out that while the forgiveness is working its way through the courts, these could potentially be implemented regardless of the Supreme Court's decisions on loan forgiveness. The plan includes the following:
- Reducing the required monthly payment under income-driven repayment plans to 5% of discretionary income for undergraduate loans (currently 10%).
- Increasing the definition of discretionary income for loan repayment purposes.
- Preventing unpaid interest from accumulating and increasing borrowers' balances, even if the required monthly payment is $0.
The timetable for these provisions is still unclear, so be sure to keep up with the latest developments in Biden's student debt relief plan. But between loan forgiveness and all the other provisions, student loan repayment could become far more manageable for millions of Americans.
