Biden’s new student-loan plan: Who qualifies for debt relief? What you need to know.

Who qualifies for the $9 billion in forgiveness?

The borrowers who are part of the Biden administration’s announcement Wednesday are part of certain groups who have been entitled to student-debt relief under the law for years. The promised forgiveness is largely the result of fixes to the student-loan system that have made it easier for these borrowers to overcome technicalities and paperwork challenges on their path to relief. 

The eligible borrowers include: 

• 53,000 borrowers who are receiving $5.2 billion in cancellations under the Public Service Loan Forgiveness program. These are borrowers who have worked for the government or certain nonprofits for at least 10 years and paid their loans during that time. 

• Nearly 51,000 borrowers who have paid on their loans for at least 20 years are receiving $2.8 billion in cancellation. Under income-driven repayment programs, borrowers pay their debt as a percentage of their income and have the remainder wiped out after at least 20 years of payments. The nearly 51,000 borrowers had been in repayment for at least 20 years, but because of errors keeping track of their payment counts, they were still on the hook for their loans. Now, their debt is being cancelled after the Department of Education reviewed their payment history and corrected errors. 

• Nearly 22,000 borrowers with a total and permanent disability are receiving $1.2 billion in relief. Student loan borrowers who have a disability so severe they won’t be able to work again can have their debt cancelled. The Department of Education used data from the Social Security Administration to find qualifying borrowers and is forgiving their debt. 

Can I apply for the forgiveness that’s been announced?

You can’t apply to become eligible for the $9 billion in debt relief announced Wednesday. That’s because the borrowers who qualify have already reached certain payment milestones or meet other criteria that allow them to have the debt canceled.

However, there are many programs borrowers can use to become eligible for debt forgiveness going forward. These include:

Public Service Loan Forgiveness: Borrowers working for the government or nonprofits can have their federal debt cancelled if they work as public servant for at least 10 years and pay on their federal loans during that time. The Biden administration has made some fixes to the program that should make it easier for borrowers who meet the spirit of the law to avoid getting tripped up by technicalities. Borrowers start the application process here. It includes a form that borrowers will need to work with their employer to fill out. 

Income Driven Repayment: Borrowers can pay their debt as a percentage of their income and have the remainder forgiven after a certain period of time under these plans. The Biden administration made sweeping changes to income-driven repayment earlier this year. Through SAVE, a new income-driven plan, borrowers with less than $12,000 in original principal can have their debt cancelled after 10 years. For borrowers with larger loans, they can have their debt discharged after at least 20 years of payments. 

Under SAVE, borrowers whose monthly payments are too low to cover the interest won’t see their balance grow. That’s because the government will cover any unpaid monthly interest. You can learn more about income-driven repayment and sign up for a plan here. 

IDR account adjustment: The Department’s review of borrowers’ payment count errors is still ongoing, so it’s possible that some borrowers will have their debt cancelled — or get closer to the cancellation milestone — in the coming months. For most borrowers these adjustments will happen automatically, but borrowers with commercially held FFEL loans, or federal loans from before 2010 that are held by a commercial lender, will need to consolidate their debt before the end of 2023 to qualify. You can apply to consolidate your loans here. 

Borrower Defense: Borrowers who believe they’ve been scammed by their schools can apply to have their debt cancelled. The Biden administration has announced $22 billion in cancellation for nearly 1.3 million borrowers who were misled by their schools or whose schools closed abruptly. You can learn more about borrower defense and apply here. 

How come the Biden administration can cancel some student debt after the Supreme Court knocked down its mass debt relief plan?

For years — in some cases, decades — borrowers in certain groups have been eligible to have their student loans forgiven under the law. The borrowers who are part of the $9 billion announcement fit this bill. 

But the Biden administration’s plan to cancel up to $20,000 in student debt for borrowers earning less than $125,000 that was struck down by the Supreme Court in June was a new program. The court’s conservative majority ruled that the HEROES Act, a law that allows the Secretary of Education to modify or waive student debt in cases of national emergency, didn’t give the Secretary of Education the authority to carry out this pandemic-era plan. 

Now, officials are in the process of taking another stab at mass debt forgiveness. They’ve grounded this so-called “Plan B” in a different law. Whether the new plan actually results in debt forgiveness for borrowers or gets struck down by a court once again won’t be known for several months.