Just the Basics: President Biden’s Student Loan Forgiveness Plan

President Biden has opened applications for his administration’s student loan forgiveness plan, but UWM students still have questions. 

Education Data says that in Wisconsin, 727,400 residents have taken student loans. Many of them qualify for forgiveness. 

The Student Loan Forgiveness program was announced by the Biden-Harris Administration on August 24 and set to open in early October, but was delayed by lawsuits. 

The U.S. Eighth Circuit Court of Appeals has temporarily blocked the plan, putting a pause on the disbursement.

The White House still encourages all those that qualify to apply.

“I’d like to know how easy the paperwork is in order to earn from this program,” said Kaylee Pikula, a UWM student that takes out loans every semester, via email.

The White House has said that they made the application “simple and easy to complete.” 

Borrowers will not be required to upload any documentation of their loans, though the Department of Education may reach out to some people for more information. 

The application requires the borrower’s date of birth, Social Security number, contact information and their income from either 2021 or 2022.  

The loans that are eligible for forgiveness are government held, including all federal direct student loans and defaulted loans. This includes undergraduate and graduate loans. 

According to the White House, borrowers could have up to $10,000 of their balance forgiven, or $20,000 for Pell Grant recipients. Some borrowers could have multiple loans forgiven at once. 

“I have private and federal loans,” said Jacob Rohan, a senior at UWM with over $40,000 in loans. Rohan relies on the loans for rent and tuition costs. 

Federal student loans are the only types of loans forgiven in this program. According to the Department of Education, the first loans to be erased will be defaulted DOE held loans. Next will be non-defaulted loans. 

Then the DOE will look at each specific loan a single borrower has.  

Loans with the highest interest rates will get first priority. If interest rates are the same, unsubsidized loans will be forgiven before subsidized. If interest rates are the same and subsidized the same, forgiveness applies to the most recently approved loan. 

Subsidized loans are those that do not incur interest while the borrower is enrolled in school at least part time. Unsubsidized loans start to incur interest as soon as the loan is disbursed to the borrower, even while they are enrolled in school. 

If all three factors (interest rates, subsidy status and date of loan) are the same, the DOE will apply forgiveness to the loan with the lowest combined loan balance and interest rate. 

To find out what type of loans you have, log into StudentAid.gov. While you are there, make sure your profile information is correct. If the DEO has current information, and your loans qualify for forgiveness, they will be automatically forgiven without having to fill out the application.

The type of loans are not the only qualifications that must be met. 

The plan forgives loans for single people making under $125,000 a year or a married couple with a combined yearly income of less than $250,000. Applicants can choose to use their income from either 2021 or 2022. 

“The forgiveness plan is going to benefit those filed independently which is just ultimately not the majority of students who are currently in college,” said Rohan via email.

Students who are claimed as dependents on their parent’s taxes could still receive loan forgiveness; however, the Department of Education will use the parents’ income to determine if they are eligible.  

A student loan borrower does not need to have a college degree to apply and receive loan forgiveness.

Those who have dropped out, have federal student loans, and make less than $125,000 a year can apply for student loan forgiveness.

“I wish UWM told us more about how to apply,” said student Mitch Stewart. “And for UWM to send out reminders to apply like they do for applying to other things like, FAFSA.” 

“Once we are comfortable that this plan will happen, we will send it out,” said Director of Financial Aid Tim Opgenorth. “We are waiting for a couple lawsuits to be settled and a couple of changes are still being made to the program.” 

Opgenorth said information will be sent out in the general weekly emails.

Since the plan’s announcement in August, President Biden has rolled back some of the loan programs that were initially going to be eligible for forgiveness. 

The programs no longer eligible for forgiveness are student loans through the Federal Family Education Loan Program (FFEL) and Perkins program loans. 

The loans were removed from the Biden Administration’s forgiveness plan after multiple lawsuits were filed calling the plan an “overreach.” 

Green Bay Federal Judge William Griesbach dismissed a lawsuit from the Brown County Taxpayers Association. According to the Associated Press, Griesbach said the association did not have standing for their case.  

The White House recommends applying for forgiveness before November 15. That way, a borrower may receive loan forgiveness before the student loan repayment freeze ends in January 2023. 

Borrowers will have a full year to submit applications and the White House expects the applications to take four to six weeks to be processed. 

Relieving Debt in the Long Run 

Student loan forgiveness is not the only part of Biden’s plan. 

“I want to know how this plan ages. I don’t know a ton about the specificities, but I imagine there are phases to the plan to help more and more people as time passes,” said Rohan. 

The first part of the plan was to extend the student loan repayment pause through December 31, with payments restarting in January 2023. 

The actual debt forgiveness is the second part of the proposed plan. 

The third part of the plan includes an attempt to make the student loan system more manageable for current and future borrowers. The Biden-Harris administration has proposed an income-driven repayment system for student loans. 

Their stated goal is to decrease monthly payments for borrowers. The plan lowers the required payment from 10% of a borrower’s income to 5%. Loan payments would not be more than 5% of a borrower’s monthly income.  

Wisconsin has lower average student debt compared to other states, but it is still a burden that many in the state face. Check the types of loans you have at StudentAid.gov and fill out an application for student loan forgiveness, linked here: https://studentaid.gov/debt-relief/application  

The application for forgiveness will close December 31.