Biden's student loan plan: What we know (and what we don't)

CORA LEWIS and ADRIANA MORGA
Associated Press
FILE - New graduates line up before the start of a community college commencement in East Rutherford, N.J., on May 17, 2018. President Joe Biden is expected to announce Wednesday Aug. 24, 2022 that many Americans can have up to $10,000 in federal student loan debt forgiven. (AP Photo/Seth Wenig, File)

NEW YORK — President Joe Biden is expected to announce Wednesday that many Americans can have up to $10,000 in federal student loan debt forgiven. Details of the plan are still being finalized, but here's what we know so far and what it means for people with outstanding student loans:

WILL BIDEN FORGIVE STUDENT LOANS?

Three people familiar with the plan say it will forgive up to $10,000 in student loan debt for anyone who makes less than $125,000 a year. They spoke on condition of anonymity to discuss details of the plan before it is announced. Some categories of borrowers could be eligible for more relief, but that was still being discussed.

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WILL THE STUDENT LOAN PAYMENT FREEZE BE EXTENDED?

Those same people say the pause on student loan payments will be extended until January. The freeze started in 2020 as a way to help people struggling financially during the COVID-19 pandemic and it's been extended several times since. It's currently set to expire on Aug. 31.

Interest rates will remain at 0% until repayments start. Under an earlier extension announced in April, people who were behind on payments before the pandemic will automatically be put in good standing.

WHO WILL QUALIFY FOR STUDENT LOAN FORGIVENESS?

Details are yet to be announced, but only people making less than $125,000 a year are expected to qualify. People who borrowed through most federal student loan programs are likely to be eligible, while those who have private loans issued by banks or schools probably won't be.

HOW DO I APPLY FOR STUDENT LOAN FORGIVENESS?

Details of that have not yet been announced, but more information will likely be available later Wednesday.

HOW MANY PEOPLE WILL THIS HELP?

About 43 million Americans have federal student debt, and a third of those owe less than $10,000. Half owe less than $20,000. The total amount of federal student debt is more than $1.6 trillion. Nearly one third of all American students take out loans to pay for college, with the average individual student debt reaching a record high of $37,014 in 2021.

WHAT IF I’VE ALREADY PAID OFF MY STUDENT LOANS — WILL I SEE RELIEF?

The debt forgiveness is expected to apply only to those currently holding student debt.

WILL STUDENT LOAN FORGIVENESS DEFINITELY HAPPEN?

Critics believe the White House will face lawsuits over the plan, because Congress has never given the president the explicit authority to cancel debt. We don't know yet how that might impact the timetable for student loan forgiveness.

— Seung Min Kim, Michael Balsamo, Chris Megerian and Zeke Miller in Washington contributed to this report.

— The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.