Biden’s Student Loan Relief Plan: What WA Borrowers Should Know

WASHINGTON — More than 43 million borrowers 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 many of the estimated 800,000 Washingtonians carrying student loan debt. 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.

According to the Education Data Initiative, Washington borrowers together have $28 billion in student loan debt, averaging more than $35,000 each. Nearly half are younger than 28, and roughly 21 percent owe between $20,000 and $40,000.

Reaction to Biden's proposal landed primarily along party lines among Washington's congressional delegation. Democratic Sen. Patty Murray called the move "a milestone moment for borrowers" and "a big step forward to get relief to those who need it most."

Republican Rep. Dan Newhouse spoke out against the plan Thursday on social media.

"Hardworking taxpayers who responsibly paid their debts or decided not to go to college should not have to pay for someone else's student loans, period," Newhouse said. "It is beyond comprehension that when American families are struggling, President Biden decided to saddle them with more debt."

Many Washington borrowers may still have a few questions about what to expect, including whether they will qualify for relief and 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.