WASHINGTON (AP) — More than 40 million Americans could see their student loan debt reduced — and in many cases eliminated — under the long-awaited forgiveness plan President Joe Biden announced Wednesday, a historic but politically divisive move in the run-up to the midterm elections.

Fulfilling a campaign promise, Biden is erasing $10,000 in federal student loan debt for those with incomes below $125,000 a year, or households that earn less than $250,000. He’s cancelling an additional $10,000 for those who received federal Pell Grants to attend college.

It’s seen as an unprecedented attempt to stem the tide of America’s rapidly rising student debt, but it doesn’t address the broader issue — the high cost of college.

Republicans quickly denounced the plan as an insult to Americans who have repaid their debt and to those who didn’t attend college. Critics across the political spectrum also questioned whether Biden has authority for the move, and legal challenges are virtually certain.

Biden also extended a pause on federal student loan payments for what he called the “final time.” The pause is now set to run through the end of the year, with repayments to restart in January.

“Both of these targeted actions are for families who need it the most: working and middle class people hit especially hard during the pandemic,” Biden said at the White House Wednesday afternoon.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were issued before July 1. For dependent students, their parents’ household income must be below $250,000.

Most people will need to apply for the relief. The Education Department has income data for a small share of borrowers, but the vast majority will need to prove their incomes through an application process. Officials said applications will be available before the end of the year.

Biden’s plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration. About 60 per cent of borrowers are recipients of federal Pell Grants, which are reserved for undergraduates with the most significant financial need, meaning more than half can get $20,000 in relief.

The plan doesn’t apply to future college students, but Biden is proposing a separate rule that would reduce monthly payments on federal student debt.

The proposal would create a new payment plan requiring borrowers to pay no more than five per cent of their earnings, down from 10 per cent in similar existing plans. It would forgive any remaining balance after 10 years, down from 20 years now.

It would also raise the floor for repayments, meaning no one earning less than 25 per cent of the federal poverty level would need to make monthly payments.

As a regulation, it would not require congressional approval. But it can take more than a year to finalize.

Biden’s plan comes after more than a year of deliberation, with the president facing strong lobbying from liberals who wanted sweeping debt forgiveness, and from moderates and conservatives who questioned its basic fairness.