President Joe Biden announced his student loan forgiveness plan Wednesday. The plan consists of three parts:

1) Provide targeted debt relief to address the financial harms of the pandemic. The plan will:

• Provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the DOE, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for married couples. 

• Extend the pause on federal student loan repayment through the end of 2022. 

2) Make the student loan system more manageable for current and future borrowers:

• Cap monthly payments for undergraduate loans at 5 percent of a borrower’s discretionary income. 

• Propose a rule for the Public Service Loan Forgiveness (PSLF) Program that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness.

3) Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they raise prices:

• Continue to advocate for the doubling of the maximum Pell Grant and to make community college free. 

• Strengthen rules regarding accountability.

• Announce new efforts to ensure student borrowers get value for their college costs.

The Department of Education is also proposing a rule to do the following:

• Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225 percent of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.

• Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with original loan balances of $12,000 or less. The Department of Education estimates that this reform will allow nearly all community college borrowers to be debt-free within 10 years.

• Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.

More details of the plan are available on the White House fact sheet and in a New York Times explanatory article.