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Student loan relief applications arriving soon: What you need to know


President Biden’s plan to wipe out as much as $20,000 in federal student loan debt per borrower will require millions of Americans to submit an application that could be available as soon as this week.

The White House has said that the application would open sometime in October and be short and online.

It is unclear exactly when the form will go live. White House press secretary Karine Jean-Pierre said this week that “no date has been set,” but she confirmed that it’s still slated for release this month.

Biden’s executive order cancels $10,000 in student loan debt for individual borrowers who earned less than $125,000 in either 2020 or 2021 (or married couples who made less than $250,000 annually in those same years). If a qualifying borrower also received a Pell grant while enrolled in school, they are eligible for up to $20,000 in debt forgiveness.

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College students

Students walk to class at Rice University in Houston on Aug. 29, 2022. (Brandon Bell/Getty Images / Getty Images)

However, the plan has attracted an onslaught of lawsuits since it was announced at the end of August, prompting the Biden administration to make some last-minute changes to the program. Borrowers are still awaiting the final, last-minute specifics, and it’s possible that a judge could place an injunction on the program.

The Department of Education regularly updates the Federal Student Aid website, where it will first share details of the loan forgiveness program.

In the meantime, here is everything that borrowers need to know:

How do I apply for the program?

Because the application is not live, it’s still unclear how to apply for the program. However, the Department of Education has said that borrowers will not need to upload any supporting documents or use their Federal Student Aid ID to submit the application.

“Once you submit your application, we’ll review it, determine your eligibility for debt relief and work with your loan servicer(s) to process your relief,” the department said in a recent email to borrowers. “We’ll contact you if we need any additional information from you.”

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Borrowers will have more than a year to apply, with the program officially closing in December 2023.

President Biden student loans relief

President Joe Biden speaks about student loan debt forgiveness at the White House on Aug. 24, 2022. (AP/Evan Vucci / AP Images)

You can sign up at the Department of Education subscription page in order to be officially notified when the application is released.

Will the money be taxed?

While the loan forgiveness will not count toward federal taxable income, there are at least six states that will consider it taxable, according to the Tax Foundation, a nonprofit group that advocates for lower taxes.

That includes Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin, which all appear to be on track to tax the student loan forgiveness.

Can I opt out of the program?

An estimated 8 million federal student loan borrowers are set to receive forgiveness automatically under the one-time cancellation plan.

However, borrowers can opt out if they prefer.

The White House pivoted on the matter after a borrower sued and argued that he would ultimately pay more in state taxes on the amount canceled than he would if he paid the remainder on his loan.

Graduate students in the class of 2022 are seen in New York City

The White House has said that the application for student loan debt forgiveness will open sometime in October and be short and online. (Erik McGregor/LightRocket via Getty Images / Getty Images)

How much will student loan forgiveness cost?

In a report released last week, the nonpartisan Congressional Budget Office estimated that Biden’s student loan plan could cost about $400 billion, though it called that figure “highly uncertain.” Other reports peg the number closer to $500 billion (Committee for a Responsible Federal Budget) or about $300 billion (Penn Wharton).

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Erasing debt will also add to the nation’s already ballooning national debt, which surged to a record-high $31 trillion this week.

Who benefits from student loan forgiveness?

Benefits from the executive order will mostly go toward top earners, according to recent findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania’s Wharton School.

Between 69% and 73% of any debt forgiven would accrue to households that are in the top 60% of income distribution in the U.S., the analysis shows.