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How Biden’s Student Loan Forgiveness Plan Could Affect You

by Guy Oron

(This article was originally published on Real Change and has been reprinted under an agreement.)


On Aug. 24, President Joe Biden announced a sweeping plan to tackle student loans, canceling up to $10,000 for borrowers who make less than $125,000 a year. Pell grant recipients will be eligible for up to $20,000 in debt forgiveness.

Student loans in the United States account for nearly $1.75 trillion of debt, 92% of which is held by the federal government. In Washington State, more than 782,000 borrowers owe roughly $28.2 billion in student loans, according to Federal Student Aid (FSA). The new Department of Education policy pertains only to the publicly held loans.

The White House said that 87% of people who will receive debt forgiveness make less than $75,000 annually.

Approximate proportion of Washingtonians with student loan debt who will be impacted by President Biden’s plan, by amount owed. Note: Due to rounding, percentages may not add up to 100. Numbers of people do not include potential Pell grant recipients. (Chart by Henry Behrens; Source: Federal Student Aid Enterprise Data Warehouse, as of March 31, 2022)

Mandatory student loan repayments have been on pause since March 2020 due to the COVID-19 pandemic. Biden’s plan extends this moratorium until the end of 2022, though he has stated that this will be the last extension.

About 249,000 borrowers in Washington have less than $10,000 in federal student loans. This means that if they made less than $125,000 in adjusted gross income (or $250,000 for married couples) in either 2020 or 2021, they will have no publicly held student loan debt after the cancellation takes place. People who paid off part or all of their loans during the COVID-19 pandemic may be eligible for a refund of up to $10,000.

According to the Education Data Initiative, more than 104,000 Washington residents received Pell grants, making them eligible for the additional $10,000 in student loan forgiveness. Biden’s student loan forgiveness policy will especially benefit Black, Latino, and Indigenous borrowers (58%, 47%, and 51% of whom have received Pell grants, respectively). Roughly 32% of white borrowers received Pell grants. Pell grants are targeted toward students with “exceptional financial need.”

However, the forgiveness portion of Biden’s new plan might not be as impactful for the 59,500 Washingtonians who owe more than $100,000 in student loans, totaling about $11 billion.

A host of other changes by the Department of Education could be more beneficial for current and future borrowers. This includes a reduction of the minimum monthly payments from 10% to 5%of a person’s discretionary income. The changes also include a new way of calculating minimum payments, making sure that anyone whose annual income is below 225% of the federal poverty line does not need to make monthly payments on their student loans.

Crucially, the new plan will cancel unpaid interest not covered by the minimum payment, as long as that payment is made. This could be a game changer, because it would help prevent debt from spiraling out of control due to accrued interest.

Additionally, Biden and Secretary of Education Miguel Cardona have pledged to reform the Public Service Loan Forgiveness program, which erases student loan debt for people who work certain jobs in the government and nonprofit sectors. Historically, the program’s onerous requirements made it difficult for people to qualify for the debt forgiveness. 

Biden claimed that he had the authority to pass these changes through executive action under the 2003 HEROES Act, which grants the Secretary of Education the authority to enact student loan relief during emergencies. However, Republicans have disputed this and plan to bring lawsuits to prevent the implementation of the student loan forgiveness policies. Some have also claimed that the policy is an attempt to “buy votes” for the 2022 midterm elections.

The White House has said that it will publish an online form for people who qualify to get their student loans canceled in early October. Borrowers can stay up to date for notifications via the FSA website and must apply for forgiveness by the end of 2023 to qualify. FSA already has income information on hand for roughly 8 million borrowers who may be eligible for automatic debt cancellation.


Guy Oron is Real Change’s staff reporter. A Seattleite, he studied at the University of Washington. Guy’s writing has been featured in The Stranger and the South Seattle Emerald. Outside of work, Guy likes to spend their time organizing for justice, rock climbing, and playing chess. Find them on Twitter @GuyOron.

📸 Featured image by zimmytws/Shutterstock.com.

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