Applications for the Biden-Harris Administration’s Student Debt Relief are set to go live sometime at the beginning of this month.
For students who received a Pell Grant, they are eligible to receive up to $20,000 of forgiveness, and for those who don’t they are eligible for up to $10,000 if their annual income is below $125,000 (below $250,000 for married couples).
To determine annual income, students should check their recent tax returns, either from 2020 or 2021. The Education Department will be looking at an individual’s adjusted gross income (AGI) found on line 11 of their federal tax return.
Borrowers who are employed by nonprofits, the military, or federal, state, Tribal or local government may be eligible to have all their student loans forgiven through the Public Service Loan Forgiveness program according to the Federal Student Aid (FSA) Office.
On top of fitting into a specific AGI, only certain federal loans are included in those being forgiven by this initiative. Parent Plus loans, Grad loans and subsidized or unsubsidized federal loans, all being distributed before June 30, 2022, will be forgiven.
A recent change designated that Perkins Loans and Federal Family Education Loans held commercially will no longer be included. Private loans are also not included in the debt forgiveness plan.
After applying, the FSA office said borrowers can expect relief within six weeks. Those seeking relief should apply by mid-November to receive relief before the expiration date on Dec. 31, 2022, according to the Education Department.
Debt forgiveness is usually a taxable income; however, it will not be counted toward federal income taxes as part of the Biden-Harris Administration’s plan. While most states align their income tax codes with their federal counterpart, it is possible that borrowers may have to pay state income tax on the amount of forgiveness they receive. According to the Tax Foundation, these states may include Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin.
For Braden Bury, a senior political science and economics major, the Biden-Harris Administration’s plan is allowing him to leave college with a sense of financial stability.
“All the debt I have right now is federal debt, so it will all be pretty much paid off,” Bury said. “… It allows me to get ahead for my future.”
Bury is a Pell Grant recipient and has taken out federal subsidized and unsubsidized loans, all of which are eligible for forgiveness under the relief plan.
Along with the Biden-Harris Administration’s plan helping Bury on a personal level, he also believes it will increase the number of students able to acquire a degree in college.
“I think especially since the cancellation is targeted towards low-income students, it will make it more accessible for lower income students wanting to continue college to do so without having a severe burden of debt on their back,” Bury said.
For more information about when the loan forgiveness applications will be available, students can stay up to date at studentaid.gov or sign up to receive email updates from the Department of Education.