Biden's Student Loan Relief Plan: What VA Borrowers Should Know

VIRGINIA — More than 43 million borrowers in Virginia and across the U.S. stand to benefit under a historic and long-awaited student loan debt relief plan announced by President Joe Biden Wednesday.

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

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

As of 2021, nearly 166 million borrowers owe a collective $1.59 trillion to student loans, more than Americans owe on their auto loans or credit card balances, according to credit reporting agency Experian’s most recent State of Student Loan Debt report.

The average balance per borrower increased slightly in 2021 to $39,487, up nearly $700 from 2020, according to Experian.

In Virginia, 1.08 million residents have student loan debt, according to the Education Data Initiative. The average debt per borrower is $39,165.

Nationwide, 33 percent of undergraduate students attending four-year public colleges and universities receive a Pell Grant. Virginia’s rate, 26 percent, is smaller, ranking Virginia 41st in the nation for its rate of Pell recipients, according to the State Council of Higher Education for Virginia.

However, eligibility is determined by a student's financial capability. Virginia’s poverty rate is ranked 42nd, which aligns with the state's Pell rate, the state council said.

After Biden's announcement on Wednesday, questions remain among Virginia borrowers who aren’t sure if they qualify for student loan 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.

RELATED: Biden Cancels $10K In Student Loan Debt For Some Virginia Borrowers