Here’s everything we know (so far) about Biden’s student loan forgiveness plan

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How much debt is getting canceled?

Did I get a Pell Grant?

There’s a good chance you’ve got one as part of your financial aid package while in college: Of the estimated 43 million borrowers who will benefit from the administration’s forgiveness plan, more than 60% are Pell Grant recipients, according to the White House.

If you are not sure whether you have received a Pell grant as part of your financial aid package, you can check your account at studentaid.gov. On the main page of your account, there is a section titled “My Help”.

Alternatively, you can check with the financial aid office of the college you attended to see if it can provide you with that information, Kantrowitz said.

Who is eligible?

Relief will be limited to borrowers who earn less than $125,000 per year, or married couples or heads of families earning less than $250,000.

Review your most recent tax return to confirm that your income has fallen below those thresholds in 2020 or 2021 (either will work). The U.S. Department of Education will consider people’s so-called adjusted gross income, or AGI, which may differ from your gross pay.

To confirm your AGI for 2020 and 2021, see line 11 on the front page of your tax return, known as Form 1040.

Which loans are eligible?

The big picture, the vast majority—about 37 million borrowers—will be eligible for forgiveness depending on their loan type (and as long as they also fall within the income threshold), as their loan is called William D. Ford Federal. direct loan program. This includes direct Stafford loans and all direct subsidized and unsubsidized federal student loans. Parent Plus and Grad loans are also eligible for relief under the Direct Program.

Then it gets more complicated.

First, the Education Department said any loan it had would qualify. This means that about 5 million borrowers who have Federal Family Education Loans (FFELs) professionally could have been excluded. These borrowers were also left out of the pandemic-era payment pause which is still in effect.

However, the department is now saying it is looking for ways to work with private lenders to ensure that even commercially held federal student loan borrowers can benefit from the forgiveness, according to a spokesperson.

The spokesperson said these borrowers will have more than a year to apply for relief once the government’s student loan waiver application becomes available, and they no longer need to take any action.

If you’re curious to make sure you qualify, you can transfer your loan to the Direct program now by calling your lender or visiting the StudentAid.gov website. You will want to fill out the “Federal Direct Consolidation Loan Application.”

All private student loans are excluded from the president’s plan.

What if I owe less than being forgiven?

When is the cutoff date for loan cancellation?

Student loans taken after June 30, 2022 will not be included in the relief.

Do I have to do something to be forgiven?

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The education department said it will launch an application by October in which borrowers can input their income data and request loan waivers. Lenders can now sign up on its website for updates on the process.

The department also said that it already has income information for about 8 million borrowers because they were enrolled in income-driven repayment plans that already required this data.

These people may get automatic cancellation.

Will loan waiver attract tax?

Student loan forgiveness will not trigger a federal tax bill.

That’s because the 2025 US rescue plan mandates student loan forgiveness tax-free until 2025 — and the law also covers Biden’s pardon, according to a White House fact sheet.

However, you may still be on the hook for the state fee, Kantrowitz said. Although many states have already said that they will not tax the relief, some states may do so.

The amount “could be equivalent to some student loan payments,” Kantrowitz said.

If you are unsure, contact a local tax professional for an estimate before filing your state tax return.

How do I make sure I actually receive forgiveness?

Experts recommend taking a photo or screenshot of your current student loan balance. That way you can be sure it drops the right amount once forgiven.

White House economist explains how student loan forgiveness will affect inflation

What is the timeline here?

A spokeswoman for the Department of Education says it can take about eight weeks to get all the necessary information from a borrower until their loan is paid off.

The last date for submission of applications for pardon will be December 31, 2023.

Can an apology fall through a legal challenge?

it’s possible.

Although no lawsuit has yet been brought, GOP attorneys general for states such as Arizona, Missouri and Texas, as well as Sen. Ted Cruz, R-Texas, and those affiliated with the conservative think tank Heritage Foundation, are considering their options when it comes to As The Washington Post reports, loan forgiveness comes to an end to try.

“In the meantime the uncertainty for borrowers is, I fear, considerable,” said Harvard law professor Lawrence Tribe.

The matter can go up to the Supreme Court. In the meantime, borrowers are still encouraged to apply for relief.

What happens when payments stop?

In addition to Biden’s announcement on student loan forgiveness, he said he would extend the payment withholding on federal student loans until December 31. Payments will resume in January.

It is the seventh extension of the pandemic-era relief policy launched under the Trump administration and will likely be the last.

— CNBC’s Sarah O’Brien and Kate Dorr contributed reporting.

What will student loan forgiveness mean for you? If you’d like to speak for the story, please email me at annie.nova@nbcuni.com

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