Federal student aid

President Biden announced on Wednesday that the federal government would cancel up to $20,000 worth of federal student loans for millions of people.

[Education Department said](https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs) it would make fixes to address past inaccuracies that would help borrowers enrolled in I.D.R. [amount earned](https://studentaid.gov/glossary/adjusted-gross-income-agi?width=300px&height=auto&className=glossaryterm&closeButton=true) above 150 percent of the [poverty level](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines), which is adjusted for household size. President Biden is [proposing a rule](https://studentaid.gov/debt-relief-announcement/) to create a new plan that will substantially reduce future monthly payments for lower- and middle-income borrowers. (You can manually add other federal loans if any are missing.) You can also compare plans side by side — how much they’ll cost over time, both monthly and in total, and if any debt would be forgiven. [undergraduate loans ](https://www.ed.gov/news/press-releases/biden-harris-administration-announces-final-student-loan-pause-extension-through-december-31-and-targeted-debt-cancellation-smooth-transition-repayment)to 5 percent of discretionary income, down from 10 percent to 15 percent in many existing plans. As a result, no borrower earning under 225 percent of the poverty level — or what a $15 minimum wage worker earns annually — will have to make a payment, the administration said. If you want to continue paying $300, the first $200 will be applied to the payment that’s due and the extra $100 should immediately be applied to principal (and not the next payment). “The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief,” according to a White House statement. loan was not eligible for the payment pause that began in 2020, it will not be eligible for the new cancellation. If you’re already enrolled in some kind of income-driven repayment plan and have submitted your most recent tax return to certify that income, your servicer and the Education Department know how much you earn and you should not need to do anything else. Those who do qualify will need to navigate the balky federal loan servicing system and keep a close eye on their accounts and credit reports for any mistakes. Individuals who are single and earn under $125,000 will qualify for the $10,000 in debt cancellation.