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What to know about Biden’s student debt relief plan and how to claim it

Tens of millions of people straddled with student loans will soon have the opportunity to wipe out up to $20,000 of their debt load.

President Joe Biden unveiled a sweeping student loan forgiveness program last week, heeding to pressure from liberals such as firebrand Sen. Elizabeth Warren (D-MA). Despite Republican vows to take legal action against the measure, the plan appears poised to go into effect.

Here is what you need to know about how to claim the relief for yourself.


What are the eligibility requirements?

Criteria for forgiveness are straightforward. The plan unveiled on Aug. 24 will scrap up to $10,000 of federal student loans from borrowers with an annual income of $125,000 or less. For borrowers who received Pell Grants during their schooling, relief jumps to $20,000.

In other words, if you have $2,000 left in outstanding student loans, all of that debt will be forgiven, but you will not receive the extra $8,000. Conversely, if you have $12,000 in lingering student loan debt, your burden will plunge to $2,000.

People who only received a Pell Grant for part of their college education are still eligible for the full $20,000 in relief, per the White House.

What year of income is this based on, and what types of loans are included?

Most people’s incomes fluctuate from year to year. To qualify for student loan relief, people must meet the income standards in either their 2020 or 2021 incomes.

Almost every type of federal student loan is eligible for forgiveness under Biden’s initiative. This includes parent PLUS loans, unsubsidized loans, and direct subsidized loans, according to the Department of Education.

However, privately held loans appear to be left out of the mix. This likely includes Perkins loans and Federal Family Education loans, which were ultimately phased out over time after the government moved to nationalize most student loans in 2010. About 92.7% of all student loans are held by the federal government, according to Education Data.

Do I have to apply for relief?

You most likely will have to submit an application. In order to ensure forgiveness is granted to eligible people, the Department of Education needs information about one’s income. The department has income information on an estimated 8 million people already, but the program is projected to provide relief for up to 43 million borrowers, according to the White House.

While the 8 million Americans whose relevant income data are available to the department may get relief automatically, the remaining people will probably have to apply. Applications will likely open up early next month, Bharat Ramamurti, deputy director of the National Economic Council, explained during a briefing last week. Borrowers should expect relief within four to six weeks after applying, per Ramamurti.

So far, there is no deadline, but the White House has encouraged borrowers to submit their applications before Nov. 15, WFAA reported.

In addition to unveiling the forgiveness program, Biden also extended the moratorium on federal student loan payments to Dec. 31. On the first of next year, borrowers will have to resume payments.

Will refunds be available?

Federal student loan payments have been on hiatus for over two years due to the pandemic, but a sliver of borrowers kept paying off their debts. One estimate pinned the number at 1.2% of borrowers, the Wall Street Journal reported.

These borrowers may be able to recoup that money so long as they are eligible for the loan cancellation program. To do this, borrowers must first request a refund from the loan servicer. Their student loan debt will then jump up by the amount they request, and they will then have to apply for the forgiveness program.

“You can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020). Contact your loan servicer to request that your payment be refunded,” the Department of Education’s Office of Federal Student Aid explains.

Will I pay taxes on this?

Maybe. Canceled student debt will not be taxed under the federal income tax, Forbes reported. However, some states may opt to classify the relief as taxable income. For example, North Carolina’s Department of Revenue recently announced it plans on doing just that.

“The North Carolina General Assembly did not adopt Section 108(f)(5) of the IRC for purposes of the state income tax. Therefore, student loan forgiveness excluded pursuant to IRC 108(f)(5) is currently considered taxable income in North Carolina,” the department explained in a press release.

About 13 states do not have to adhere to that federal tax exemption North Carolina’s Department of Revenue referenced, according to CNBC. Therefore, those states are considering taxing the student loan relief.


Biden’s sweeping plan is estimated to cost roughly $240 billion over the next 10 years and could provide relief for up to 43 million borrowers and wipe out total debt loads for almost 20 million borrowers, according to the White House.

Republicans have already teased that they will battle the program in court. The legal basis for the program stems from the 2003 HEROES Act, which bestows the power to relieve student loan debt in times of national emergency or war. Some Republicans have voiced concerns that they will not be successful in challenging the program.

“The difficulty here is finding a plaintiff who the courts will conclude has standing,” Sen. Ted Cruz (R-TX) said, per the Washington Post. “That may prove a real challenge.”

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