What Would You Do If You Were Suddenly Debt-Free? Millions of Student Borrowers Will Find Out

As student borrowers get set to apply for federal loan forgiveness, some of them are also considering for the first time homeownership and other major milestones as they embark on new lives without the specter of debt hanging over them.

Of the 43 million Americans with federal student loans, 95 percent are expected to qualify for some forgiveness under a plan announced by President Joe Biden in August.

The debt relief could be life-altering. Christopher Kea, a 29-year-old analyst for a software company in Austin, graduated from the University of Texas in 2015 with about $26,000 in student loans. He still owes about $8,900. He estimates he’ll get that forgiven plus receive a $2,700 refund for payments made during the pandemic pause. That will enable him to buy a home — a longtime goal.

“Having the debt forgiven, that’s likely going to increase my credit score and free up funds for me for the down payment,” he said. “I’m so grateful for the loan forgiveness.”

The application process will begin later this month and close at the end of 2023. It will take at least four to six weeks to process applications, the Department of Education has said.

For those with incomes less than $125,000 (or $250,000 for married couples), the Biden plan calls for cancellation of up to $20,000 of student debt for Pell Grant recipients and up to $10,000 for non-Pell Grant recipients.