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As part of President Joe Biden’s historic student loan forgiveness plan, up to 8 million people could get automatic debt relief, according to the White House.
Across the board, most people with federal student debt will be eligible for some forgiveness: up to $10,000 if they didn’t receive a Pell Grant, which is a type of aid available to low-income undergraduate students, and up to $20,000 if they did. The aid is limited to those who make less than $125,000 per year, or married couples or heads of households earning less than $250,000.
Those who will get automatic loan cancellation are those for whom the U.S. Department of Education already has income data on file and can therefore verify eligibility without waiting for an application.
Here’s what you need to know.
Who qualifies for the automatic loan cancellation?
To automatically verify certain borrowers’ income data for tax years 2021 or 2020 (whichever is lower), the Education Department plans to use data obtained through the Free Application for Federal Student Aid, or FAFSA, as well as via income-driven repayment plans.
The FAFSA is how families apply for financial aid for college each year, while income-driven repayment plans allow borrowers to repay their loans in a more affordable way by capping their monthly bills at a share of their earnings. Both require proof of income; however, because the…
