How many Utahns will benefit from student loan forgiveness? And how soon?

Utah students take on less debt than those in other states — but tens of thousands of residents stand to benefit.

(Francisco Kjolseth | The Salt Lake Tribune) Students begin fall semester at Utah Valley University on Thursday, Aug. 25, 2022. President Biden said Wednesday he will cancel up to $10,000 in federal student loan debt for many borrowers — and double that amount for Pell Grant recipients — a move that could offer some level of forgiveness for about 43 million Americans. Here's how many Utahns could be affected.

Utah usually ranks among the states with the lowest student loan debt — but under President Joe Biden’s debt forgiveness plan, more than 100,000 residents may get relief.

The president’s plan will cancel $10,000 in federal student loan debt for people who make $125,000 a year or less. People who received Pell Grants — which help undergraduates who have “exceptional financial need” — would be eligible for up to another $10,000 in additional forgiveness.

Between those two totals, the Biden administration could erase federal student debt for up to 108,800 Utahns — if they meet the income requirements, according to the Federal Student Aid office.

That many Utahns are nearly 40% of the state’s residents who had outstanding federal student loans as of March — a total of more 307,000 people.

Collectively, Utahns with outstanding federal student loan debt owe about $10.2 billion, or over $33,000 per person.

“This move from the Biden administration certainly will have a big impact on a lot of Utahns, especially those from lower income households, so I think that’s always a good thing,” said Geoffrey T. Landward, deputy commissioner of the Utah System of Higher Education.

“We’re glad people can get some relief from the debt loads that they have,” Landward continued, “but we’re really working hard toward finding ways to make college more affordable in the first place.”

Of Utah’s college class of 2020, 39% graduated with debt, and only 3% took on private debt — the lowest percentages in the country, according to a report from the Institute for College Access & Success.

Utah’s class of 2020 also had the lowest state average for debt at graduation, the report said, with students owing about $18,350 at the time they received their degrees, based on data from public and private nonprofit colleges.

Who gets student loan forgiveness?

People who have federal student loan debt will eligible; those who have private loans issued by banks or schools probably won’t be, The Associated Press has reported.

Debtors also have to qualify based on their income: Individuals must make $125,000 a year or less. Married couples lose eligibility if they make more than $250,000 a year.

Current students with loans are eligible for debt relief, according to a fact sheet from the White House. Borrowers who are dependent students will be eligible based on their parents’ income, rather than their own income, it said.

The Department of Education estimates that 21% of the borrowers who are eligible for forgiveness are 25 years old and younger. About 44% are ages 26 to 39.

How much forgiveness can people get?

People who received Pell Grants — which help undergraduates who have “exceptional financial need” — held by the federal Department of Education will be eligible for up to $20,000 in forgiveness.

Pell Grant recipients are more than 60% of the borrower population, the administration said.

People with other federal loan debt can see up to $10,000 canceled.

If you owe less than the amount of forgiveness you are eligible to receive, your forgiveness will be capped at that amount. The debt relief will not be treated as taxable income on federal income tax forms.

How do you sign up for student loan forgiveness, and when will student loan forgiveness start?

First, Biden has said he will extend the current freeze on loan payments until Dec. 31.

And the application for forgiveness will become available by or before that date, the White House said. The federal Department of Education is working on a simple application process, it said.

The AP suggests watching the federal student aid website for more details in coming days. Or you can sign up to be notified when more information about claiming forgiveness is available at https://www.ed.gov/subscriptions.

Nearly 8 million borrowers may be eligible to receive relief automatically because their income data is already available to the education department, the White House noted.

If you have voluntarily made loan payments since March 2020, when the freeze on payments started, you can request a refund for those, according to the Federal Office of Student Aid. Contact your loan servicer to request a refund, the AP advises.

The AP also notes that there may be lawsuits filed over the question of whether the president has the authority to cancel debt, and it is unknown how that possibility could impact the timetable for forgiveness.

What’s next?

Under other planned reforms, monthly student loan payments will become smaller and more manageable for both current and future borrowers who are low and middle income, the Biden administration said.

The Department of Education is proposing a rule, for example, to cut in half the amount that undergraduate borrowers have to pay each month, from 10% to 5% of discretionary income.

It would also raise the amount of income that is considered non-discretionary, ensuring the lowest-income borrowers don’t have to make monthly payments. And among other changes, it would forgive loan balances after 10 years of payments, instead of 20 years, for those with original loan balances of $12,000 or less.

The administration said it also wants to reduce the cost of college and hold schools accountable when they hike up prices.