You Owe $10,000 Less on Federal Student Loans, Here’s What to Do Next

After years of speculation, millions of student loan borrowers received some excellent news today.

The Biden administration announced it would forgive $10,000 of federal student loan debt for borrowers who make less than $125,000 annually.

Borrowers who went to college on Pell Grants may be eligible to receive $20,000 in forgiveness. Pell Grants don’t have to be repaid but are given based on financial need.

The payment freeze has been extended again until Dec. 31, 2022, too.

Biden’s plan also includes a change that allows borrowers to protect more of their income from student loan payments. Undergraduate borrowers will be able to cap their monthly payments at 5% — down from 10% — of their monthly income.

“Earning a college degree or certificate should give every person in America a leg up in securing a bright future. But for too many people, student loan debt has hindered their ability to achieve their dreams — including buying a home, starting a business, or providing for their family,” US Secretary of Education Miguel Cardona said in a statement announcing the decision.

The DOE said more details on how borrowers can claim this student loan relief will be released in the coming weeks. An application will be available no later than the end of 2022 — when the pause on federal student loan repayments ends.

Nearly 8 million borrowers are likely to receive automatic forgiveness based on known income data, according to DOE.

What Should You Do if You Still Have Student Loan Debt?

If you qualify for the DOE’s forgiveness plan and have less than $10,000 in student loan debt, then…