Biden’s Student Loan Relief Plan: What Illinois Borrowers Should Know

ILLINOIS — At a time when more than 1.6 million Illinois residents carry student debt, they along with other 43 million Americans stand to benefit under a historic and long-awaited student loan debt relief plan announced by President Joe Biden on Wednesday.

The plan will forgive $10,000 in student loan debt for some borrowers who still owe for their college education in Illinois. It also cancels an additional $10,000 for those who received federal Pell Grants to attend college. Under the new plan, Biden also directed officials to extend an existing pause on federal student loan payments until Dec. 31.

Still, questions remain among borrowers in the Land of Lincoln who aren’t sure if they qualify for relief or what they might have to do to claim it.

Here are some answers we know so far:

How do I know if I qualify for relief?

Your annual income must be below $125,000 to be eligible. For couples filing taxes jointly, their yearly income must be below $250,000. If you received a Pell Grant in college and meet the income threshold, you’re eligible for up to $20,000 in debt cancellation.

Here’s a look at how student loan debt is affecting borrowers in Illinois, according to the Education Data Initiative:

• 1,631,500 Illinois residents have student loan debt.
• The average debt per borrower is $37,757.
• 12.7 percent of residents owe student loan debt.
• 15.6 percent of the state’s indebted student loan borrowers owe less than $5,000.
• 21.8 percent owe $20,000 to $40,000.
• 2.6 percent owe more than $200,000.

“Higher education should be within reach for all Illinoisans without the fear that they will be saddled with lifelong debt,” Illinois Attorney General Kwame Raoul said Wednesday in a statement after the Biden announcement “The administration’s announcement today is a clear acknowledgment of the burden student loan debt imposes, and a response to repayment and forgiveness programs that have been historically and systemically flawed.

“While long-term reforms to the student loan system in this country are desperately needed, I commend the Biden administration for offering some immediate relief to millions of student loan borrowers.”

However, some Illinois lawmakers and candidates seeking office in the state said the Biden plan is flawed.

"This is Robin Hood in reverse. This is simply taking from the poor and the middle class and giving to the better off among us," Chris Dargis, a Republican candidate for Congress in the 8th District, said in a statement issued on Wednesday.

According to the Washington Post, the Department of Education will use income information from 2020 or 2021 to determine eligibility.

Also, relief is capped at the amount of your outstanding debt. For example, if you’re eligible for $10,000 in debt relief but have a remaining balance of $5,000, you will only receive $5,000.

Private loans are not eligible for relief.

How do I receive my loan forgiveness?

According to the U.S. Department of Education, nearly 8 million borrowers whose income information is already available to the agency will receive their relief automatically.

The agency will launch an online application in the coming weeks if the Department of Education does not have your income information. The application will be available through Dec. 31.

Sign up for email alerts through the Department of Education to be notified when the application is open.

How does the new income-based repayment plan work?

While the Department of Education has always offered income-based repayment plans, Biden’s proposal aims to create a new program that substantially reduces future monthly payments for lower- and middle-income borrowers.

The new plan will ensure borrowers pay no more than 5 percent of their monthly discretionary income on undergraduate loans, down from 10 percent under the current income-driven repayment plan. The new program will also raise the amount of income considered non-discretionary, protecting it from repayment.

What if I took out a student loan this year?

Loans must originate before July 1 to qualify. Current students will qualify for loan forgiveness if their parent's income is below the required amount, the Post reported.

What do I need to do to extend my student loan pause through the end of the year?

Nothing. The pause will occur automatically.