White House officials have been weighing — and leaning toward — the cancellation of up to $10,000 in student loan debt per borrower tied to an income threshold, CNN has learned.

According to multiple sources familiar with the discussions, the plan is designed to offer forgiveness to individuals who earn less than $125,000 per year.

In addition to that baseline of student loan debt forgiveness for individuals who fall under a certain income level, administration officials have also recently discussed the possibility of additional forgiveness for specific subsets of the population, according to sources familiar with internal discussions in the administration.

The announcement could come as early as Wednesday, but it is not clear that a final decision on the details of the announcement — as well as the timing — has been made, and there could always be eleventh-hour changes. The White House is also expected to address in the coming days whether to extend again the current pause on federal student loan payments, which is set to expire on Aug. 31.

CNN has reached out to the White House for comment.

In recent days, White House officials have been in communication with lawmakers to discuss their thinking on student loan debt forgiveness, ahead of the current pause on payments expiring. Last week, for example, Senate Majority Leader Chuck Schumer, Democratic Sen. Elizabeth Warren of Massachusetts, and Democratic Sen. Raphael Warnock of Georgia had a discussion with senior White House officials, sources said.

The White House has suggested in the past that Biden was considering canceling $10,000 per borrower but excluding those who earn more than $125,000 a year.

Setting an income cap, which has been the subject of intense debate both inside and outside the administration, was also crafted as a buffer against criticism that the forgiveness would benefit those with the means to manage their debt payments.

Education Secretary Miguel Cardona said Sunday that Americans can expect a decision from the administration on student loans in the "next week or so." With less than two weeks to go, Americans have been left guessing for weeks whether Biden will extend the current moratorium or, perhaps, forgive some of their debt.

"We've been talking daily about this, and I can tell you the American people will hear within the next week or so from the President and the Department of Education on what we're going to be doing around that," Cardona told NBC's Chuck Todd on "Meet the Press."

He did not elaborate on the details, saying he would not get ahead of the announcement.

Some Democratic lawmakers and advocates have been urging Biden to broadly cancel up to $50,000 in student loan debt per borrower, but the president has consistently pushed back on canceling that much.

Biden has canceled more student loan debt than any other president, with his administration authorizing the cancellation of nearly $32 billion in loans largely for borrowers who were defrauded by their for-profit colleges and for permanently disabled borrowers.

There are new changes to who is eligible for federal student loan forgiveness. It comes as six states filed lawsuits to try and block the plan altogether.

The change impacts borrowers who used Perkins loans and Federal Family Education loans.

They're part of a program that ended back in 2010 and are managed by private banks, but they still qualify for forgiveness if they were consolidated into a direct loan by Sept. 30. The Education Department said this will affect around 770,000 people.

President Joe Biden said that federal student loan borrowers who meet income requirements would have up to $10,000 of their student loans forgiven. That amount increases to $20,000 for those who received Pell Grants in college.

But those who made payments who are eligible for forgiveness continued making payments during the pandemic-era moratorium on student loan bills can request a refund.

“They can request a refund of the payments that they made that weren't required, and that's been the case since the very beginning of the pandemic,” said student loan expert Mark Kantrowitz.

Bankruptcy is becoming an option for more people who are dealing with student loan debt. The Biden administration recently announced changes that would make it easier to discharge these loans in bankruptcy.

The changes set specific requirements for you to prove you're dealing with economic distress.

The government will consider whether your expenses equal or exceed your income.

It will also assess if your inability to pay will continue in the future. The new process is supposed to be more transparent.

“In the form, there's basically, along with other information, there's 10 boxes,” Christie Arkovich, a bankruptcy attorney, said. “And so the theory is that the more boxes you check, the more likely you would be entitled to a discharge. And the boxes are things like you're older, you're over 65, you have health conditions, a dependent has health conditions, you're not able to make much money, you know, to maintain a living standard plus pay the student loans.”

The changes should make it easier for people to get their federal student loans discharged.

It was nearly impossible before, Akrovich said.

“The people who are reaching out to us right now for bankruptcy are really being pressured by increasing cost of living through inflation, and so forth,” she said. “And It's not that they maybe owe any one big amount, but when you look at it all together, they just can't get their head above water, so those are good candidates for bankruptcy.”

She says you also need to ensure you don't have assets you would otherwise lose in bankruptcy, like a savings account or equity in a car.

She also says bankruptcy isn't a good option for people who may be helped by another government program.

WASHINGTON —

In a good month, Celina Chanthanouvong has about $200 left after rent, groceries and car insurance. That doesn't factor in her student loans, which have been on hold since the start of the pandemic and are estimated to cost $300 a month. The pause in repayment has been a lifeline keeping the 25-year-old afloat.

"I don't even know where I would begin to budget that money," said Chanthanouvong, who works in marketing in San Francisco.

Now, after more than three years, the lifeline is being pulled away.

More than 40 million Americans will be on the hook for federal student loan payments starting in late August under the terms of a debt ceiling deal approved by Congress last week. The Biden administration has been targeting that timeline for months, but the deal ends any hope of a further extension of the pause, which has been prolonged while the Supreme Court decides the president's debt cancellation.

Without cancellation, the Education Department predicts borrowers will fall behind on their loans at historic rates. Among the most vulnerable are those who finished college during the pandemic. Millions have never had to make a loan payment, and their bills will soon come amid soaring inflation and forecasts of economic recession.

Advocates fear it will add a financial burden that younger borrowers can't afford.

"I worry that we're going to see levels of default of new graduates that we've never seen before," said Natalia Abrams, president of the nonprofit Student Debt Crisis Center.

Chanthanouvong earned a bachelor's in sociology from the University of California-Merced in 2019. She couldn't find a job for a year, leaving her to rely on odd jobs for income. She found a full-time job last year, but at $70,000, her salary barely covers the cost of living in the Bay Area.

"I'm not going out. I don't buy Starbucks every day. I'm cooking at home," she said. "And sometimes, I don't even have $100 after everything."

Under President Joe Biden's cancellation plan, Chanthanouvong would be eligible to get $20,000 of her debt erased, leaving her owing $5,000. But she isn't banking on the relief. Instead, she invited her partner to move in and split rent. The financial pinch has them postponing or rethinking major life milestones.

"My partner and I agreed, maybe we don't want kids," she said. "Not because we don't want them, but because it would be financially irresponsible for us to bring a human being into this world."

Out of the more than 44 million federal student loan borrowers, about 7 million are below the age of 25, according to data from the Education Department. Their average loan balance is less than $14,000, lower than any other age group.

Yet borrowers with lower balances are the most likely to default. It's fueled by millions who drop out before graduating, along with others who graduate but struggle to find good jobs. Among those who defaulted in 2021, the median loan balance was $15,300, and the vast majority had balances under $40,000, according to the Federal Reserve Bank of New York.

Resuming student loan payments will cost U.S. consumers $18 billion a month, the investment firm Jefferies has estimated. The hit to household budgets is ill-timed for the overall economy, Jefferies says, because the United States is widely believed to be on the brink of a recession.

Despite the student loan moratorium, Americans mostly didn't bank their savings, according to Jefferies economist Thomas Simons. So they'll likely have to cut back on other things — travel, restaurants — to fit resumed loan payments into their budgets. Belt-tightening could hurt an economy that relies heavily on consumer spending.

Noshin Hoque graduated from Stony Brook University early in the pandemic with about $20,000 in federal student loans. Instead of testing the 2020 job market, she enrolled at a master's program in social work at Columbia University, borrowing $34,000 more.

With the payments paused, she felt a new level of financial security. She cut costs by living with her parents in New York City and her job at a nonprofit paid enough to save money and help her parents.

She recalls splurging on a $110 polo shirt as a Father's Day gift for her dad.

"Being able to do stuff for my parents and having them experience that luxury with me has just been such a plus," said Hoque, who works for Young Invincibles, a nonprofit that supports student debt cancellation.

It gave her the comfort to enter a new stage of life. She got married to a recent medical school graduate, and they're expecting their first child in November. At the same time, they're bracing for the crush of loan payments, which will cost at least $400 a month combined. They hope to pay more to avoid interest, which is prohibited for them as practicing Muslims.

To prepare, they stopped eating at restaurants. They canceled a vacation to Italy. Money they wanted to put toward their child's education fund will go to their loans instead.

"We're back to square one of planning our finances," she said. "I feel that so deeply."

Even the logistics of making payments will be a hurdle for newer borrowers, said Rachel Rotunda, director of government relations at National Association of Student Financial Aid Administrators. They'll need to find out who their loan servicers are, choose a repayment plan and learn to navigate the payment system.

Video below: Rossen Reports: Steps to prepare for student loan payments to start back up

"The volume of borrowers going back on the system at the same time — this has never happened before," Rotunda said. "It's fair to say it's going to be bumpy."

The Education Department has promised to make the restart of payments as smooth as possible. In a statement, the agency said it will continue to push for Biden's debt cancellation as a way to reduce borrowers' debt load and ease the transition.

For Beka Favela, 30, the payment pause provided independence. She earned a master's in counseling last year, and her job as a therapist allowed her to move out of her parents' house.

Without making payments on her $80,000 in student loans, she started saving. She bought furniture. She chipped away at credit card debt. But once the pause ends, she expects to pay about $500 a month. It will consume most of her disposable income, leaving little for surprise costs. If finances get tighter, she wonders if she'll have to move back home.

"I don't want to feel like I'm regressing in order to make ends meet," said Favela, of Westmont, Illinois. "I just want to keep moving forward. I'm worried, is that going to be possible?"

___

AP Economics Writer Paul Wiseman contributed to this report.

A three-year pause on student loan payments will end this summer regardless of how the Supreme Court rules on the White House plan to forgive billions of dollars in student loan debt.

If Congress approves a debt ceiling deal negotiated by House Speaker Kevin McCarthy and President Joe Biden, payments will resume in late August, ending any lingering hope of a further extension of the pause that started during the COVID pandemic. Even if the deal falls through, payments will resume 60 days after the Supreme Court decision.

That ruling is expected sometime before the end of June. No matter what the justices decide, more than 40 million borrowers will have to start paying back their loans by the end of the summer at the latest.

Here's what to know to get ready to start paying back loans:

How should I prepare for student loan payments to restart?

Betsy Mayotte, President of the Institute of Student Loan Advisors, encourages people not to make any payments until the pause has ended. Instead, she says, put what you would have paid into a savings account.

"Then you've maintained the habit of making the payment, but (you're) earning a little bit of interest as well," she said. "There's no reason to send that money to the student loans until the last minute of the 0% interest rate."

Mayotte recommends borrowers use the loan-simulator tool at StudentAid.gov or the one on TISLA's website to find a payment plan that best fits their needs. The calculators tell you what your monthly payment would be under each available plan, as well as your long-term costs.

"I really want to emphasize the long-term," Mayotte said.

Sometimes, when borrowers are in a financial bind, they'll choose the option with the lowest monthly payment, which can cost more over the life of the loan, Mayotte said. Rather than "setting it and forgetting it," she encourages borrowers to reevaluate when their financial situation improves.

What's an income-driven repayment plan?

An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size. It takes into account different expenses in your budget, and most federal student loans are eligible for at least one of these types of plans.

Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. If your income is low enough, your payment could be as low as $0 per month.

If you'd like to repay your federal student loans under an income-driven plan, the first step is to fill out an application through the Federal Student Aid website.

Talk to an adviser

Fran Gonzales, 27, who is based in Texas, works as a supervisor for a financial institution. She holds $32,000 in public student loans and $40,000 in private student loans. During the payment pause on her public loans, Gonzales said she was able to pay off her credit card debt, buy a new car, and pay down two years' worth of private loans while saving money. Her private student loan payment has been $500 a month, and her public student loan payment will be $350 per month when it restarts.

Gonzales recommends that anyone with student loans speak with a mentor or financial advisor to educate themselves about their options, as well as making sure they're in an income-driven repayment plan.

The Federal Student Aid website can help direct you to counselors, as well as organizations like the Student Borrower Protection Center and the Institute of Student Loan Advisors.

"I was the first in my family to go to college, and I could have saved money with grants and scholarships had I known someone who knew about college," she said. "I could have gone to community college or lived in cheaper housing … It's a huge financial decision."

Gonzales received her degree in business marketing and says she was "horrible with finances" until she began working as a loan officer herself.

Gonzales's mother works in retail and her father for the airport, she said, and both encouraged her to pursue higher education. For her part, Gonzales now tries to inform others with student loans about what they're taking on and what their choices are.

"Anyone young I cross paths with, I try to educate them."

Can I set up a payment plan for my student loans?

Yes — payment plans are always available. Even so, some advocates encourage borrowers to wait for now, since there's no financial penalty for nonpayment during the pause on payments and interest accrual.

Katherine Welbeck of the Student Borrower Protection Center recommends logging on to your account and making sure you know the name of your servicer, your due date and whether you're enrolled in the best income-driven repayment plan.

What if I can't pay?

If your budget doesn't allow you to resume payments, it's important to know how to navigate the possibility of default and delinquency on a student loan. Both can hurt your credit rating, which would make you ineligible for additional aid.

If you're in a short-term financial bind, according to Mayotte, you may qualify for deferment or forbearance — allowing you to temporarily suspend payment.

To determine whether deferment or forbearance are good options for you, you can contact your loan servicer. One thing to note: interest still accrues during deferment or forbearance. Both can also impact potential loan forgiveness options. Depending on the conditions of your deferment or forbearance, it may make sense to continue paying the interest during the payment suspension.

How can I reduce costs when paying off my student loans?

— If you sign up for automatic payments, the servicer takes a quarter of a percent off your interest rate, according to Mayotte.

— Income-driven repayment plans aren't right for everyone. That said, if you know you will eventually qualify for forgiveness under the Public Service Loan Forgiveness program, it makes sense to make the lowest monthly payments possible, as the remainder of your debt will be canceled once that decade of payments is complete.

— Reevaluate your monthly student loan repayment during tax season, when you already have all your financial information in front of you. "Can you afford to increase it? Or do you need to decrease it?" Mayotte said.

— Break up payments into whatever ways work best for you. You could consider two installments per month, instead of one large monthly sum.

Are student loans forgiven after 10 years?

If you've worked for a government agency or a nonprofit, the Public Service Loan Forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower's debt after 20 to 25 years.

Borrowers should make sure they're signed up for the best possible income-driven repayment plan to qualify for these programs.

Borrowers who have been defrauded by for-profit colleges may also apply for borrower defense and receive relief.

These programs won't be affected by the Supreme Court ruling.

The White House said Monday that it still has no plans to extend a pause on student loan payments that has been in effect since the start of the pandemic.

When asked Monday if the Biden Administration has any plans to extend the moratorium on loan payments, press secretary Jen Psaki said that a "smooth transition back into repayment is a high priority for the administration."

"The Department of Education is already communicating with borrowers to help them return to repayment on Feb. 1 and has secured contract extensions with loan servicers. So, we are preparing for a range of steps here," Psaki said.

She added that the White House is monitoring the impact that the omicron variant could have on the economy and added the administration would release more information on their plans in the weeks ahead.

In August, the White House extended the pause on student loan payments through January 2022. At the time, the Biden Administration noted that it would be the final time it would extend the moratorium.

The Trump Administration put a moratorium on student loan payments at the start of the pandemic. Since then, borrowers have not been required to make monthly payments on their loans.

According to Scripps political reporter Joe St. George, an estimated $110 billion is believed to be in the hands of Americans and not the federal government as a result of the no-payment pandemic policy.

President Biden announced on Jan. 20 that most federal student loan payments would be suspended interest-free through September 2021 due to the ongoing pandemic.

Once the suspension lifts, though, a $0 payment still may be a necessity for some borrowers.

According to an October 2020 survey from NerdWallet conducted by The Harris Poll, 45% of Americans with federal student loans of their own weren’t confident they’d be able to afford their loan payments when the payment freeze was scheduled to end last December.

Borrowers will hopefully be better off financially by September. But if you’ll need to keep paying less, here are your options.

Enroll in income-driven repayment

For a manageable payment, start with an income-driven repayment plan.

“Look at income-driven repayment first because it offers the most benefits,” says Persis Yu, director of the nonprofit National Consumer Law Center’s Student Loan Borrower Assistance Project.

Those benefits can include forgiveness after 20 or 25 years of payments, partial interest subsidies and monthly bills as low as $0.

Payments are based on adjusted gross income, family size and federal poverty guidelines. For example, if you had an AGI of $19,000, were single and lived in the lower 48 states, you’d pay $0 for 12 months under most income-driven plans.

If you already use one of these plans and your income has decreased, your payments can too.

“It’s important for borrowers to realize that they can ask to have their plans recertified at any time,” Yu says.

You can estimate payments under different income-driven plans with the Department of Education’s Loan Simulator.

Defer student loan payments

Federal student loan payments can be paused via deferment and forbearance.

Deferment is tied to events like losing your job or undergoing cancer treatment. If you’re eligible, this option can keep payments at $0.

For example, an unemployment deferment may be possible if you work fewer than 30 hours per week. If your hours were cut, but your household’s earnings are too high for an income-driven plan, deferment may make sense.

The government also covers all the accruing interest on subsidized loans during deferment.

“There are some subsidies on income-driven plans, but they’re more generous with deferment,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit that offers borrowers free advice.

Deferment is often available for up to three years, but you have to reapply periodically. For an unemployment deferment, the duration is every six months.

Place loans in forbearance

Payments are currently suspended interest-free via a special administrative forbearance. When that break ends, your servicer can grant you a discretionary forbearance, potentially without paperwork.

But besides no bills, that type of forbearance offers few benefits.

“Forbearance is a last resort,” Mayotte says. “It’s either that or you’re going to go delinquent or default.”

Interest usually accrues during forbearance. When it ends, that interest can be added to the amount you owe, meaning future interest grows on a bigger balance.

With any $0 payment strategy, it’s possible you’ll repay more overall.

“If you can afford it, I would always recommend paying versus not paying,” Mayotte says.

Getting ready

The most important thing to do now is understand your options, says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit that represents student loan servicers.

In part, that’s because servicers can’t change your payments yet.

“It’s a matter of regulation and process,” Buchanan says. “We can’t actually put you into (a) plan right now because you’re not in repayment.”

But you can do the following:

• Check your info. Log on to your servicer’s website to check your contact information and payment amount. If you’re not sure who your servicer is, visit the Federal Student Aid website. Mayotte says to beware of companies reaching out and offering help for a fee; your servicer will never charge you.
• Gather paperwork. Applications can require documentation like pay stubs, which Buchanan says must be from the past three or four months when you submit your forms. If you applied now, you’d likely have to do so again with more current information. But you can get a head start by figuring out what you’ll need and filling out what you can.
• Set a reminder. With payments set to resume in October, plan to submit your requests over the summer.

“If you wait until the day before your due date in the month when 30 million people are going into repayment,” Buchanan says, “call times are going to be long.”
This article was written by NerdWallet and was originally published by The Associated Press.

More From NerdWallet

Ryan Lane writes for NerdWallet. Email: rlane@nerdwallet.com.

WASHINGTON -- Total consumer credit, or the amount of borrowing Americans did, in May rose by 10%, roughly $35.3 billion according to the Federal Reserve.

The larger-than-expected increase was driven by borrowing on credit cards, as well as auto and student loans showing solid gains in the month of May.

Average credit scores improved in 2020, as millions of Americans saved money from not commuting to work, potentially saving on childcare and other day-to-day costs that were adjusted because of pandemic restrictions. That means millions of Americans could get better rates for credit cards and loans.

It was also the fourth straight month of growth in consumer borrowing, after April saw an increase of $20 billion.

May's increase of more than $35 billion is the largest one-month gain on record, which date back to 1943.

Millions of Americans have had their student loan payments paused for the past year after Congress passed several stimulus bills, allowing the pause on payments with no interest accruing. The pause has allowed many people, like Anna Garcia, to save hundreds of dollars a month and put it towards other needs during this pandemic.

“This past year really tested us in terms of finances,” said Garcia.

Garcia owes just over $99,000 in student loan debt. For the past few years, she has paid $250 a month under her repayment plan that’s based on her income. Just before the pandemic, her payments were going to nearly double as she moved into a new job role.

“I was looking at making an additional $350 per month as the pandemic was about to start and then they stopped those payment,” said Garcia. "So, that actually really saved me.”

Garcia put the $600 a month that was earmarked for student loans into saving instead, and after a few months, her fiancé had an idea for that money.

“He just kind of threw it out there like, ‘Why don’t we just go ahead and start planning the wedding?,’” Garcia recalled.

The couple had been engaged since 2019 but they didn’t have a timeline to wed because they didn't have any extra money to put towards it. However, with the $600 savings a month, in addition to their stimulus checks, they could now afford a small wedding.

“Quite frankly, with the coronavirus and all the restrictions, we wanted to keep it small. We wanted to keep it intimate,” said Garcia. "So, we saw that opportunity and we just decided to go for it.”

The couple got married on November 25, 2020, with just their closest friends and family. The wedding cost them around $8,000, almost exactly what she would’ve paid this past year in student loan repayment.

“We were able to get everything that we wanted in that wedding and everything came together so beautifully that day,” said Garcia.

After the wedding, Garcia has still been putting aside the $600 each month and continues to strategize on how to better use those dollars. She recently decided to invest the money in the stock market to hopefully grow it, and then use it to repay her student loan debt when she has to pay that again.

“Our conversation with money has definitely changed over the past year,” she said. "It’s not just about saving but making that money work for us."

Student loan debt relief over the past year gave Garcia the opportunity to marry the love of her life and potentially a better shot at paying down her student loan debt faster. For others, it’s been a lifeline to buy food or keep the lights on when jobs have been lost and new ones are hard to come by.

The student loan relief has been extended by Congress until at least Sept. 30.

Wilberforce University is canceling student debt for 2020 and 2021 graduates, according to a news release.The president of the historically Black university made the announcement during 2021 commencement exercises Saturday, noting the total amount of cleared debt will be more than $375,000."As these graduates begin their lives as responsible adults, we are honored to be able to give them a fresh start by relieving their student debt to the university," President Elfred Anthony Pinkard said.Students were seen cheering and dancing after Pinkard made the announcement, according to CNN affiliate WHIO.This initiative does not cover federal loans, bank loans or any other kind of personal loans taken by the student. It includes fines and fees owed to the university and tuition balances that were being paid directly to the university by students or their parents.The debt will be covered by various scholarships, such as the United Negro College Fund, Inc., Jack and Jill, Inc., as well as other funding, according to the release.Rodman Allen, who graduated Saturday, said he's going to use the money to invest in his future, according to the university."I couldn't believe it when he said it. It's a blessing," Allen said in the university release. "I can use that money and invest it into my future."Twin graduates Taylor and Tyler Thompson are also very thankful for the debt forgiveness, according to WHIO."It was very heartwarming, because now we can actually, like clear our minds and actually focus," said Tyler, who plans on applying to a police academy. "It makes me want to do more actually, now that I know I don't have to worry about it," said Taylor, who wants to get her real estate license and eventually start her own business.This isn't the first time Wilberforce University assisted its students financially during the COVID-19 pandemic.Last spring, financial aid was provided to Wilberforce students whose bursar office balance would have prohibited them from registering for upcoming fall classes, according to the news release. This was made possible by the Higher Education Emergency Relief Fund, which was set up through the CARES Act.