Student loan forgiveness: What Arizonans need to know, including who qualifies and how to apply

President Joe Biden on Wednesday announced his effort to administer student loan debt relief for low- to middle-income borrowers through plans to provide up to $20,000 in debt cancellation to Pell Grant recipients and up to $10,000 in debt cancellation to non-Pell Grant recipients.

To be eligible for the relief, loan borrowers must have an individual income of less than $125,000 or household earnings of less than $250,000. The debt relief will not be available for high-income households and individuals in the top 5% of incomes.

Biden also continued the pause on federal student loan repayment through Dec. 31, leaving borrowers to resume their payments in January 2023.

Here are more questions and answers about what Arizonans need to know about Biden's student loan plan.

Did Biden cancel student loan debt?

Biden’s recent announcement did not extinguish all student loan debt, but many borrowers are eligible for loan relief.

Who qualifies for student loan forgiveness?

Individuals with an income of less than $125,000 or households with earnings of less than $250,000 can qualify for the $10,000 in debt relief. Borrowers who received a Pell Grant and meet the income requirements can have up to $20,000 forgiven.

Nearly 90% of those who will receive relief and who are not in school make less than $75,000 annually, according to the Education Department.

Among eligible borrowers, more than one-third are over 40, including 5% who are senior citizens. In addition, 21% of eligible borrowers are 25 or younger and nearly one-half are among the ages of 26 to 39.

Related: Biden's student loan cancellations divide Arizona congressional delegation

What is a Pell Grant?

A Pell Grant, which is awarded to low-income students, is a needs-based grant designed to help students cover the cost of their college expenses. Pell Grant recipients are more than 60% of the borrower population, and Pell Grants are frequently used by students of color. Although the award varies, the maximum federal Pell Grant award is capped off at $6,895 for the 2022-23 academic year.

How many Americans have student loan debt?

Federal student loan debt adds up to $1.6 trillion for more than 45 million borrowers.

What is the average student loan debt?

The typical undergraduate student with loans now graduates with nearly $25,000 in loan debt.

What if I didn't finish my degree?

No problem. That does not disqualify you from receiving debt cancellation.

Will private student loans be forgiven?

No, private loans will not be forgiven in Biden’s plan.

By definition, private loans are non-federal loans that are made by private organizations, including credit unions, banks and state-affiliated or state-based organizations. These are loans that borrowers owe to the student loan provider.

Is Sallie Mae a federal loan?

Sallie Mae is a private loan. Sallie Mae was once a government-sponsored entity, but when the company split into two, it became a consumer bank that provides private loans.

How to apply for student loan forgiveness?

Loan borrowers are required to fill out a form through an application process to receive loan forgiveness.

Although the application process and any benefits may be indefinitely pushed back because of legal challenges, the Biden administration plans to have the application available by the termination of the pause on federal student loan repayments.

Will I have to pay taxes on the canceled debt?

Taxes do not have to be paid on the debt relief. The canceled debt will not be treated as taxable income for federal income tax purposes.

What loan repayment plan is being proposed?

The Department of Education proposed a student loan repayment plan that caps the monthly payments for undergraduate loans at 5% of a borrower’s discretionary income. Under most current repayment plans, borrowers must pay nearly double that amount.

How much will this cost the federal government and taxpayers?

According to an estimate from a model developed by the Wharton School of the University of Pennsylvania, a one-time maximum debt cancellation of $10,000 for borrowers with an income that is less than $125,000 will cost nearly $300 billion.

What if I've already paid off my student loans?

The debt cancellation is expected to apply only to borrowers who currently have student loan debt.

What document explains your rights and responsibilities as a federal student loan borrower?

The Master Promissory Note is a legally binding document that outlines the rights of a federal student loan borrower. An MPN, which can be good for up to 10 years, also details the terms and conditions of repayment for a borrower.

Reach the reporter at eforquer@gannett.com.

This article originally appeared on Arizona Republic: Student loan forgiveness: How to apply and who qualifies