NEW YORK (AP) — President Joe Biden is expected to announce Wednesday that many Americans can get up to $10,000 in federal student debt forgiven. Details of the plan are still being finalized, but here’s what we know so far and what it means for people with outstanding student loans:
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Will Biden Forgive Student Loans?
Three people familiar with the plan say it will forgive up to $10,000 in student loan debt for anyone earning less than $125,000 a year. They spoke on condition of anonymity to discuss details of the plan before it was announced. Certain categories of borrowers could benefit from greater relief, but this was still under discussion.
Will the student loan repayment freeze be extended?
These same people say the pause on student loan repayments will be extended until January. The freeze began in 2020 as a way to help people in financial difficulty during the COVID-19 pandemic and it has been extended several times since. It is currently due to expire on August 31.
Interest rates will remain at 0% until repayments begin. Under an earlier extension announced in April, people who were in arrears before the pandemic will be automatically brought into good standing.
Who will be eligible for student loan forgiveness?
Details have yet to be announced, but only people earning less than $125,000 a year are expected to qualify. People who have borrowed through most federal student loan programs are likely to be eligible, while those with private loans issued by banks or schools are unlikely to be.
How do I apply for student loan forgiveness?
Details on that have yet to be announced, but more information will likely become available later on Wednesday.
How many people will this help?
About 43 million Americans have federal student debt, and a third of them owe less than $10,000. Half owe less than $20,000. The total amount of federal student debt is over $1.6 trillion. Nearly a third of all U.S. students take out loans to pay for college, with average student debt hitting an all-time high of $37,014 in 2021.
What if I’ve already paid off my student loans – will I see relief?
Debt cancellation should only apply to people who currently have student debt.
Will student loan forgiveness definitely happen?
Critics believe the White House will face legal action over the plan because Congress never gave the president explicit power to cancel the debt. We don’t yet know what impact this might have on the student loan forgiveness timeline.
It’s an ongoing story. We will update it as new information becomes available.
Seung Min Kim, Michael Balsamo, Chris Megerian and Zeke Miller in Washington contributed to this report. The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reports aimed at improving financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.