President Joe Biden announced a plan Wednesday to forgive up to $20,000 in federal student loan debt.
Who is eligible?
The Department of Education said it will cancel student loan debt for individuals who make under $125,000 and married couples who make under $250,000.
Borrowers who received a Pell Grant in college are eligible for up to $20,000 in debt cancellation. People who didn't receive a Pell Grant are eligible for up to $10,000 in student loan forgiveness.
People who aren't sure if they were awarded a Pell Grant may find the answer by logging into their FAFSA account.
The Department of Education said it will provide an application in the coming weeks so people can claim the relief. It added that nearly 8 million borrowers may be eligible to receive relief automatically because of information already available to the department.
Future repayment plan changes
The Department of Education is also initiating a new rule that it says will lower future monthly payments.
"It would cut in half—from 10% to 5% of discretionary income—the amount that borrowers have to pay each month on their undergraduate loans, while borrowers with both undergraduate and graduate loans will pay a weighted average rate," the department said.
Loans would also be forgiven after a borrower has paid for ten years if they had an original loan balance of $12,000 or less. The current rule allows loans to be forgiven after 20 years. The new rule would also cover unpaid monthly interest, the department said.
Pandemic repayment pause
President Biden extended the repayment pause that was initiated at the beginning of the pandemic. The pause will now expire on Dec. 31, 2022. Biden said that will be the final extension of the pause.