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Originally Published: Aug 24, 2022
Originally Published: Aug 24, 2022 Last Updated: Aug 26, 2022 8 min read
Students walk outdoors on lawn of University campus

President Joe Biden caused celebration, consternation and a whole lot of confusion Wednesday when he announced a plan to give millions of Americans up to $20,000 in student loan forgiveness.

After months of rumors — and years after making it a cornerstone of his campaign — Biden indicated he intended to use his executive authority to cancel as much as $10,000 in student loan debt for people whose annual income during the pandemic was under $125,000 ($250,000 for married couples). Borrowers who fall under that threshold and received a need-based Pell Grant in college qualify for up to $20,000 in relief.

The Education Department estimates that roughly 27 million people will qualify for $20,000 of relief, and millions more are eligible for up to $10,000. Some 20 million could see their student debt completely wiped out.

"That’s 20 million people who can start getting on with their lives," Biden said Wednesday. "All this means people can start to finally crawl out from that mountain of debt and get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business."

While messaging from the White House and Education Department clearly spelled out things like income limits and eligible loan types, it also left a lot up in the air. We have more questions than answers about the timeline for the relief, legality of the executive order and the specifics of how to actually claim student loan forgiveness.

Here's an up-to-date master post of everything confirmed so far.

Who's eligible for student loan forgiveness?

Americans with existing federal student loans can qualify for forgiveness if they meet certain income requirements. To be eligible, your income must be under $125,000 annually ($250,000 if you're a head of household or part of a married couple filing taxes jointly).

If your loans are private or your income exceeds those limits, you don't qualify for student loan forgiveness under this plan.

How much student debt is being forgiven?

It depends. If you meet the income requirements and got a Pell Grant in college, you're eligible to have as much as $20,000 in debt wiped out. If you meet the income requirements but didn't have a Pell Grant, you can get up to $10,000 forgiven.

The $10,000 and $20,000 figures refer to the maximum amounts you can get discharged. For example, if you're a Pell Grant recipient who owes $13,000, you can have $13,000 forgiven (the government won't pay you those extra $7,000 or anything).

How do I know if I got a Pell Grant?

Pell Grants generally go to low-income students with financial need. Like federal student loans, they're tied to the Free Application for Federal Student Aid, so if you don't recall ever submitting the FAFSA, chances are you didn't get one.

To find out whether you got a Pell Grant in college, log into StudentAid.gov. You'll need your FSA ID username, email or phone number as well as your password.

Can Biden legally forgive student loans?

Good question. The president has long been resistant to the idea of forgiving student loans via executive action, instead saying he preferred to have Congress pass legislation on debt cancellation. (That didn't happen.)

The Education Department published a letter Wednesday laying out its case for why Secretary Miguel Cardona has the legal authority to discharge student loans. But politicians like Rep. Barry Loudermilk, R-Ga., and Rep. Bob Gibbs, R-Ohio, surfaced "legal concerns" on Twitter Wednesday.

Other critics pointed to remarks by Biden ally Nancy Pelosi, the Speaker of the House, who said Tuesday she was excited because she previously "didn't know what authority the president had to do this." ("Now, it appears that the president will have that authority," Pelosi later added.)

Legal challenges are all but certain. Some pundits predict Biden's student loan forgiveness plan could even go to the Supreme Court, putting its timeline in jeopardy.

How long will student loan forgiveness take?

Nobody knows for sure. But on Friday, administration officials said during a press briefing that an application should be available in early October. Once submitted, the process will take between 4 and 6 weeks, so the administration is recommending borrowers apply by Nov. 15 so that, in theory, their loans can be forgiven before payments resume next year.

Are student loan payments still paused?

Yes. Federally held student loans have been in forbearance since the pandemic began in spring 2020. This payment pause has been extended several times, by both President Donald Trump and Biden.

Most recently, payments were scheduled to resume Aug. 31. But at the same time he announced forgiveness Wednesday, Biden confirmed one last extension. Now, student loan payment requirements are set to start again on Jan. 1, 2023.

Can I get student loan forgiveness if I'm still in college?

Yes. Borrowers are eligible if they meet the income requirements and their loans were taken out before July 1, according to White House officials.

Is student loan forgiveness taxable?

No. The White House said in its announcement that "this debt relief will not be treated as taxable income for the federal income tax purposes."

Is Biden's student loan forgiveness going to make inflation worse?

Inflation is at record-high levels right now in part due to the three rounds of stimulus checks the government distributed to help Americans through the COVID-19 crisis. And people like Sen. Mitt Romney, R-Utah, are worried canceling debt could drive it even higher.

Wiping out millions of folks' loans, however, will likely only have a "small or moderate" impact on inflation, as Adam Looney, an economist and finance professor at the University of Utah, previously told Money. That's because, unlike with the stimulus checks, the relief will be gradual — and easier for the economy to absorb.

How do I get my student loans forgiven?

Right now, there's not much you can do. We don't have any clear directions on the loan forgiveness application process, and as previously mentioned, this whole proposal is probably going to get tied up in the legal system.

"In the coming weeks, the Department of Education will lay out, in detail, a short and simple form to apply for this relief along with information when this application process opens," Biden said Wednesday. "There’s a lot of material that is going to be put out about how this is being implemented."

Want to keep up with it all? Sign up to get notifications at StudentAid.gov/debtrelief (and read Money, of course).

Have questions about how student loan forgiveness will work? Email us at college@money.com.

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