Biden just forgave millions in student debt. How to find out if your loan is affected

Student loan borrowers finally got the news many of them have been waiting for: President Joe Biden announced a plan to cancel up to $10,000 per borrower for individuals who meet a certain income threshold, and he extended the student loan payment pause through the end of the year.

Biden shared the news in a tweet and says more details will come this afternoon.

The announcement comes days before the payment pause was set to expire Aug. 30.

According to CNBC, there are currently 44 million people in the U.S. who hold federal student loan debt, totaling around $1.7 trillion.

If you have student loans, here is what you need to know about loan forgiveness and the extended payment pause.

Who qualifies for forgiveness?

Under Biden’s new plan, borrowers who make less than $125,000 annually will see $10,000 of their debt canceled. Pell Grant recipients will see $20,000 in forgiveness.

For households, the income requirement to qualify for forgiveness is less than $250,000 annually.

The White House also announced that those with undergraduate loans can cap their repayments at 5% of their monthly income.

Four in 10 people who attended college, representing 30% of all adults in the country, have some debt from their education, according to the Federal Reserve. Of this group, 20% of college attendees still owed money for their education, and of that percentage, 96% of those attendees say they have student loans to pay back.

As of 2021, the median amount of student loan debt that borrowers in America owed was between $20,000 and $24,999, but a quarter of borrowers had less than $10,000 in outstanding payments, the Fed’s data shows.

So far, the Biden-Harris administration has overseen $32 billion in student debt relief for more than 1.6 million borrowers, according to the Department of Education. This relief includes $13 billion for one million borrowers whose educational institutions “took advantage of them,” more than $10 billion for more than 175,000 public service workers and $9 billion in disability discharges for over 425,000 borrowers.

Extended pause on payments

The pause on federal student loan payments will now last until Dec. 31, 2022.

Borrowers should expect to hear from the Department of Education with an update on the status of their loans, according to Forbes. Any questions can be directed to your student loan servicer, but payments will automatically stay paused.

Student loan payments have been paused since the start of the COVID-19 pandemic in 2020. Since then, Biden has extended the pause four times, most recently in April. This latest extension comes just days before the pause was set to expire on Aug. 31.

While the payment moratorium has been extended until the end of the year, the White House says this is the last extension.

Experts suggest that borrowers start preparing to make payments again.

“All this does is delay when you repay the loan,” Scott Buchanan, executive director of the Student Loan Servicing Alliance, previously told McClatchy News.

Borrowers should start looking ahead, making plans for when payments resume, Buchanan said.

“Talk to your servicer. Figure out what your monthly payment is going to be, and in your budget start setting that aside and either put that into a savings account or just reserve it in your checking account. Just pretend like you’re making that payment every month.”

The pause does not prevent borrowers who want to make payments from doing so. According to the Department of Education’s Federal Student Aid office, borrowers can make a one-time payment or resume monthly payments at any time by contacting their servicer. Making payments toward debt during the pause may save borrowers money in interest once payments resume, the office says.

This is a developing story and will be updated.