President Joe Biden on Wednesday announced his plan to settle student loan debt, which includes canceling some borrowers’ debt and extend the pandemic-related payment pause.
The Biden administration has already canceled nearly $32 billion of the $1.6 trillion in unpaid federal student debt by expanding existing forgiveness programs for public sector workers, borrowers with disabilities and students who have been defrauded. by for-profit colleges.
Here are the details CNN learned about the new Biden plan, including how much will be forgiven and who is eligible.
The plan applies to federal student loan borrowers.
The amount of debt forgiven depends on whether the borrower received a Pell grant to attend college. A Federal Pell Scholarship is only awarded to undergraduate students who “display exceptional financial need and have not completed a bachelor’s, graduate, or professional degree” and “do not have to be repaid, except in certain circumstances,” according to the Ministry of Education. Federal Office of Student Aid. According to data cited by the White House, Pell Grants currently cover only one-third the cost of a four-year public college degree, which has led to increased borrowing.
Individual borrowers who earn less than $125,000 per year and married couples or heads of households who earn less than $250,000 per year will have up to $10,000 of their federal loan student loan debt canceled if they did not receive a Pell grant as an undergraduate, according to the FSA website.
Individual borrowers who earn less than $125,000 per year and married couples or heads of households who earn less than $250,000 per year but received a Pell grant as an undergraduate student will see their loan debt student waived up to $20,000.
Nearly 8 million borrowers may be able to automatically receive debt forgiveness because the Department of Education already has their income information, the FSA says.
The Biden administration will launch an app in the coming weeks for borrowers to provide their income information or if borrowers are unsure if the department already has their income information. The FSA says the application will be available before the end of the federal student loan repayment break on December 31.
Borrowers can sign up to receive updates on when the application is open on the Department of Education’s subscriptions page.
Student loan repayments will again be suspended until December 31, 2022, with repayments beginning in January 2023.
The Biden administration is also proposing a rule to create a new income-based reimbursement plan in which borrowers pay no more than 5% of their monthly income on undergraduate loans, a decrease from the current 10% threshold.
The rule would also be increase the amount of income considered “non-discretionary income” so that no borrower earning less than 225% of the federal poverty level will have to make a monthly payment.
For borrowers with a loan balance of $12,000 or less, the loan balance would be be forgiven after 10 years of payments instead of the current 20-year mark, under the proposed new income-contingent repayment plan.
And to prevent a borrower’s loan balance from increasing while the individual makes monthly payments, under proposed rule, Biden administration cover unpaid monthly interest, even if the the monthly payment is $0 due to the borrower’s income level.
This story has been updated with additional information.