After the recent announcement of Biden’s student debt relief program, millions of borrowers ask themselves if they are eligible for such aid. The plan seeks to help many Americans by paying off their student loans but this depends on income type of loans and previous repayment records. In this article, we will guide you through the process of understanding if you meet the criteria for Biden’s student debt relief plan and what to do if you do.
Understand the Basics of the Relief Program
Before diving into the qualification process, it’s important to understand the key components of Biden’s student debt relief plan. The program offers:
- $10,000 in loan forgiveness for most borrowers with federal student loans.
- $20,000 in loan forgiveness for borrowers who received Pell Grants while in college.
These amounts only apply to federal student loans, not private loans, and the relief is available to borrowers earning under a specific income threshold.
Check the Income Eligibility Requirements
A crucial factor in determining your eligibility is your income level. Under the Biden debt relief program, there are specific income caps you must meet to qualify for forgiveness:
- $125,000 or less in adjusted gross income (AGI) for individual filers.
- $250,000 or less in AGI for married couples filing jointly or heads of households.
To confirm your income status, you can use the most recent federal tax return, either filed for 2020 or 2021. Your AGI is stated on your tax return and refers to the total income you have after some adjustments, for example, the deduction for student loan interest or retirement contribution. If your AGI for either of the said year falls within these specified limits then you can apply for student debt cancellation.
Determine the Type of Loans You Hold
Biden’s student loan relief program only applies to federal student loans, so the next step is to check the type of loans you have. Here’s how you can verify your loan status:
Federal Loans That Qualify:
- Direct Loans:
These include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
- Federal Family Education Loans (FFEL):
Some FFEL loans that are owned by the Department of Education also qualify for forgiveness.
- Perkins Loans:
Federally held Perkins Loans are eligible for cancellation under the relief plan.
Loans That Do Not Qualify:
- Private student loans:
These are issued by private lenders, such as banks or credit unions, and are not eligible for relief under this program.
To find out what types of loans you hold, log into the Federal Student Aid (FSA) website at studentaid.gov. Once you’re logged in, you’ll see a dashboard that lists all your federal student loans and their statuses. This will give you a clear picture of whether your loans are eligible for relief.
Identify If You Received a Pell Grant
If you received a Pell Grant while attending college, you could qualify for up to $20,000 in loan forgiveness under the Biden plan. Pell Grants are need-based grants awarded to low-income undergraduate students, and they do not need to be repaid. Here’s how to check if you received a Pell Grant:
- Log into your studentaid.gov account and check your financial aid history.
- Look for entries labeled “Pell Grant” in your aid records.
If you find Pell Grants in your history, you’re eligible for the higher forgiveness amount of $20,000. If you didn’t receive a Pell Grant, you may still qualify for $10,000 in loan forgiveness.
Check Your Loan Repayment Status
In addition to the type of loan, there are other factors that may determine your eligibility to Biden’s student debt relief; the repayment status. Those who are repaying their loans currently or those who are under an income driven repayment plan are likely to qualify. However, if you are in default or delinquent then you might need to do a little more to meet the requirements.
Steps for Borrowers in Default:
If you’re in default, the Department of Education has introduced the Fresh Start program which enables borrowers in default to be readmitted for financial aid and be eligible for forgiveness under Biden’s plan.
Apply (If Required)
Even if the borrower’s student loans are covered under the Biden plan, most eligible borrowers would have to apply for loan forgiveness. It is believed that the application process will be easy and will only include the basic information about yourself, your income, and your loan.
The Department of Education will inform the applicants once the application is ready, so stay tuned for the emails and check the studentaid.gov frequently. The time for the application of forgiveness is believed to reach well up to 2023, a factor that means that borrowers will not be pressured to apply for the same.
In this case, it is important to monitor for Automatic Forgiveness.
Certain borrowers may be automatically forgiven without applying for the same depending on the type of loan they took. If you have provided your income details to the Department of Education before, for example using an income-driven repayment plan or the latest tax return, you might not need to apply for forgiveness.
Even if you are sure that you are eligible for automatic forgiveness, you should also keep an eye on your loan accounts to ensure that your relief has been granted.
Bottom line
Biden’s student debt relief program offers significant financial assistance for millions of borrowers, but determining your eligibility requires reviewing your income, loan type, and repayment status. By following the steps outlined above, you can quickly check if you qualify for forgiveness and take the necessary actions to benefit from this historic program. Make sure to stay informed about application deadlines and any additional steps you may need to take as the Department of Education rolls out further guidance.