Biden’s Student Loan Relief Plan: MI Borrowers’ Questions Answered

MICHIGAN — Nearly half of Michiganders with student loan debt could see their loans cut in half or eliminated entirely after President Biden announced Wednesday a long-awaited student loan debt relief plan.

"Nearly 700,000 Michiganders will have their debt cut in half or eliminated entirely, lifting a huge burden off their backs," Gov Gretchen Whitmer said. "People can use these savings to buy a home, start a business, get married, or start a family."

The plan will forgive $10,000 in student loan debt for some borrowers in Michigan. It also cancels an additional $10,000 for those who received federal Pell Grants to attend college.

While the move does provide some relief for borrowers, some local representatives feel the cancellation didn't go far enough.

"As the largest holder of education debt, the United States Government must do more to lift this burden off the backs of people who went to school for a better quality of life," Rep. Rashida Tlaib (D-Detroit) said. "I will continue to push for education debt cancellation of $50k or more, and I know many people out on the streets will do the same."

Rep. Lisa McClain (R-Macomb), on the other hand, doesn't believe the federal government has the authority to make such a move, calling it "another handout from Democrats."

"Biden and the Democrats are penalizing fiscal responsibility by canceling student loan debt," McClain said. "If the President wants to forgive $10,000 for millions of high-income college students, it should be left to Congress to vote on it."

Under the new plan, Biden also directed officials to extend an existing pause on federal student loan payments until Dec. 31.

Still, questions remain among Michigan borrowers who aren’t sure if they qualify for relief or what they might have to do to claim it.

Here are some answers we know so far:

How do I know if I qualify for relief?

Your annual income must be below $125,000 to be eligible. For couples filing taxes jointly, their yearly income must be below $250,000. If you received a Pell Grant in college and meet the income threshold, you’re eligible for up to $20,000 in debt cancellation.

According to the Washington Post, the Department of Education will use income information from 2020 or 2021 to determine eligibility.

Also, relief is capped at the amount of your outstanding debt. For example, if you’re eligible for $10,000 in debt relief but have a remaining balance of $5,000, you will only receive $5,000.

Private loans are not eligible for relief.

How do I receive my loan forgiveness?

According to the U.S. Department of Education, nearly 8 million borrowers whose income information is already available to the agency will receive their relief automatically.

The agency will launch an online application in the coming weeks if the Department of Education does not have your income information. The application will be available through Dec. 31.

Sign up for email alerts through the Department of Education to be notified when the application is open.

How does the new income-based repayment plan work?

While the Department of Education has always offered income-based repayment plans, Biden’s proposal aims to create a new program that substantially reduces future monthly payments for lower- and middle-income borrowers.

The new plan will ensure borrowers pay no more than 5 percent of their monthly discretionary income on undergraduate loans, down from 10 percent under the current income-driven repayment plan. The new program will also raise the amount of income considered non-discretionary, protecting it from repayment.

What if I took out a student loan this year?

Loans must originate before July 1 to qualify. Current students will qualify for loan forgiveness if their parent's income is below the required amount, the Post reported.

What do I need to do to extend my student loan pause through the end of the year?

Nothing. The pause will occur automatically.