President Joe Biden announced Wednesday that his administration is forgiving some student loan debt for U.S. borrowers and extending the federal student loan repayment pause until Dec. 31, both actions that have been highly anticipated and closely watched by millions of Americans.
The move comes a week before the pause on student loan repayments was set to expire on Aug. 31. The measure was put in place in the early days of the coronavirus pandemic and was designed to relieve borrowers from defaulting on student loans and allow them to begin repayments in good standing when the state of the economy improved.
The new changes could "provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers," according to a White House fact sheet.
The move could be of particular benefit to women, who hold nearly two-thirds of all student loan debt in the U.S., according to the American Association of University Women, and Black borrowers, who are disproportionately burdened by student loan debt, according to the National Consumer Law Center.
MORE: The student debt gender gap: Women burdened more by debt call for systemic changesBelow are some of the top questions surrounding student loan forgiveness and what experts say borrowers should consider.
The president tweeted an outline of the changes on Wednesday, which include forgiving up to $20,000 in student loan debt for Americans who attended colleges and universities on federal Pell grants and up to $10,000 for Americans who did not attend schools on Pell grants. This would only apply to borrowers who earn $125,000 or less per year.
Under this new Biden administration plan, individual borrowers who took out a federal student loan and make $125,000 or less per year qualify for loan forgiveness. Those who are married or in a household making a combined $250,000 a year and current student borrowers whose parents fall under the income caps are also eligible for loan forgiveness, according to the White House fact sheet published Wednesday.
The Department of Education also specified that borrowers who recently paid off or made payments to their federal student loans during the repayment pause may also be able to request a refund of loan repayments made since March 13, 2020.
Parents who also took out Parent PLUS Loans or direct loans with the federal government also qualify for loan forgiveness, according to White House officials.
The federal student loan pause ends on Dec. 31. Those with student loans will have to start making repayments in January 2023.
Additionally, those with undergraduate loans will be able to cap their repayments at 5% of their monthly income.
The federal government estimates that more than 45 million Americans have approximately $1.6 trillion in student loan debt, according to the White House fact sheet.
According to data from the U.S. Department of Education, American undergraduates on average hold over $27,000 in student loans after graduation.
Borrowers should contact their loan servicer(s) to determine how to begin or resume making repayments and to discuss specific conditions of repayments. If a borrower was using an auto-debit service previously, they should not expect the service to proceed again automatically.
Student loans can be federal student loans that are funded by the federal government or private loans managed by a lender like a bank, school, state agency, or other institution. Private student loans are not included in Biden's student loan forgiveness plan.
A federal student loan can be refinanced or reorganized into a private loan with different terms, but borrowers should carefully consider the benefits and drawbacks before doing so. There are advantages a borrower may have to give up if refinancing, including qualifying for temporary loan payment relief, no interest periods, potential loan forgiveness and discharges, according to the Department of Education.
There are several types of student loans and a borrower will need to take a closer look at what types of loans they have -- whether federal or private -- and the different terms for each loan.
The federal government is giving borrowers until Oct. 31 to apply for a waiver and credits for past repayment periods under the Public Service Loan Forgiveness program, a federal program that forgives student loan balances after a borrower, who has worked full-time for a qualifying employer, has completed 120 qualifying payments. These payments can be ones made under income-driven repayment plans.
Under the Consolidated Appropriations Act of 2018, the federal government also established a Temporary Expanded Public Service Loan Forgiveness program which may apply to borrowers who don't necessarily qualify for the PSLF program.
Borrowers can visit the StudentAid.gov website to see if they qualify for or to apply for the PSLF/TEPSLF program and/or waivers and credits.
For additional information on the student loan forgiveness program changes and for more details that will be released in the coming weeks, borrowers can visit the StudentAid.gov website.