It’s been months of “will he, won’t he,” but we finally have an answer: there will be some post-COVID student loan forgiveness as championed by the Biden administration.

Key Takeaways

  • Automatic debt relief through the Joe Biden student loan forgiveness plan is not guaranteed – you need to apply for it.
  • Borrowers with federal student loans may be eligible for up to $10,000 of debt cancellation.
  • Borrowers who received Pell Grants may be eligible for up to $20,000 of debt cancellation.
  • You must make less than $125,000 (as an individual) or less than $250,000 (for married couples or the head of household). There are other restrictions that may apply depending on your loan type.
  • Payments are paused again, this time until December 31, 2022. The pause is automatic and you do not need to apply for it.

According to the U.S. Department of Education, nearly 8 million people could qualify for some student debt relief automatically. That’s billions – yes, billions – of dollars of debt relief for Americans who borrowed money for their education. In this guide, we’ll explain how this plan will work and how it could affect you.

How to know if you qualify for the Joe Biden student loan forgiveness plan

You must meet certain parameters set by the Biden-Harris Administration and Department of Education to take advantage of this student loan forgiveness plan. These parameters cover your types of loans, income level, and whether you ever received Pell Grants.

Types of loans

Not all types of student loans are eligible for cancellation through this plan. Only federal student loans issued through the Department of Education could potentially be forgiven. Private student loans are not eligible.

Note: While the type of loan matters, the total you owe does not. Those with any amount of federal student debt could qualify.

The good news is that multiple types of federal aid are eligible for this one-time cancellation. Unlike with the PSLF program, all of these loan types are eligible for up to $10,000 of forgiveness if they have an outstanding balance as of June 30, 2022:

  • William D. Ford Federal Direct Loans (Direct Loans
    • Subsidized loans
    • Unsubsidized loans
    • Parent PLUS loans
    • Graduate PLUS loans
    • Consolidation loans (all underlying loans must have been first disbursed on or before June 30, 2022)
  • Federal Family Education Loans (FFEL)
  • Federal Perkins Loans

Defaulted loans (includes Department of Education-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and Graduate PLUS; and Perkins loans held by the Department of Education) Check with your loan servicer to see what type you borrowed.

What if I received Pell Grants?

Pell Grant recipients are eligible for an even greater amount of student loan forgiveness. If you received a Pell Grant for your education, you could receive up to $20,000 in loan forgiveness – $10,000 more than non-Pell Grant recipients. Even if you only received one Pell Grant, you can still qualify for the $20,000.

Keep in mind that this only applies to the individual Pell Grant recipient. If your child got a Pell Grant and you have Parent PLUS loans would only qualify for the $10,000 of relief.

What if I refinanced?

If you refinanced your student loans, that means you took out a private loan at a lower interest rate to consolidate and pay off your federal student loans.

Unfortunately, private loans are not eligible for Joe Biden’s student loan forgiveness plan.

Income limits

If your salary is too high, you may not qualify. Limits depend on your tax filing status.

Note: Federal income tax will NOT apply to your canceled debt. However, several states are currently considering applying state income taxes to the forgiven amount.

For individuals

Those filing as individuals (or married but filing separately) must make less than $125,000 per year to qualify. Those making more than that will not receive any debt forgiveness.

For married couples/head of household

Those filing jointly as a married couple or as head of household must make less than $250,000 to qualify. Households making more than that aren’t eligible for any debt forgiveness.

What about Public Service Loan Forgiveness (PSLF)?

Public Service Loan Forgiveness (PSLF) is a federal program that offers loan forgiveness for borrowers in qualifying careers.

Recent updates have made it easier to qualify for this usually exclusive program. It’s possible you may qualify for forgiveness (or receive credit toward forgiveness) even if you haven’t been in your service career for 10 years and have your entire remaining student debt balance canceled.

The White House has an online tool to help you determine if you qualify for PSLF.

But be quick – you must apply before October 31, 2022, for the more relaxed rules to take effect.

What if I made payments during the loan freeze?

Many borrowers tried to be extra responsible with their student loans and kept paying even when payments weren’t required. If you made payments during the freeze, you may be eligible for a refund.

This refund will not be automatic. You must contact your servicer to ask about it.

Asking for a refund may not be necessary unless the payments you made after March 13, 2020, and before December 31, 2022, fully paid off your loans and made you ineligible for forgiveness.

What if I already paid off my student loans?

The Biden Administration’s student loan forgiveness plan only covers loans that had an outstanding balance as of June 30, 2022. You could be eligible for a refund if you made payments during the recent loan payment freeze.

However, you are out of luck if you paid off your loans before then. There are no refunds or payments available to those who have already paid off their student debt.

What to do next

Alright, so you understand Biden’s student loan forgiveness update and you think you qualify. What now? Here are your next steps.

Add these dates to your calendar

The following important dates should be on your radar:

  • Early October 2022: The loan forgiveness application becomes available. Fill it out as soon as possible.
  • October 31, 2022: The deadline for applying for PSLF with the eased eligibility requirements.
  • December 31, 2023: Deadline to apply for Biden student loan forgiveness program
  • January 2023: The student loan payment pause will end. You will be required to resume making payments toward your student loan balance.

Update your info with StudentAid.gov and your servicer

Now is a good time to make sure all your personal information on StudentAid.gov and your loan servicer’s website is correct. Log in to both portals and review your profile for accuracy.

Fill out the application

The application for Biden’s student loan forgiveness will open in early October 2022. Even if the Department of Education has your information, don’t expect the cancellation to be automatic.

Fill out the form as early as possible to increase the likelihood you receive loan forgiveness before payments start again next January.

Budget for payments to start in 2023

Student loan payments were first paused on March 13, 2020, and in the 2+ years that you haven’t had to make federal student loan payments, it’s likely that you’ve become accustomed to using that money elsewhere.

Review your budget before this forbearance period ends January 2023 to ensure you are financially prepared to resume this payment once again. Play it safe and anticipate that you’ll be making the same monthly payment that you were prior to the pause, even if you’re eligible for Biden’s student loan forgiveness plan. The $10,000 or $20,000 may not take effect before payments resume.

When will my student loans be forgiven?

After you submit your application, you can expect to see the debt relief reflected in your loan balance within four to six weeks. Send in your application as soon as possible so you see this relief before payments restart at the beginning of 2023.

More details can be found in this summary of the one-time cancellation from StudentAid.gov.

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Article last modified on September 20, 2022. Published by Debt.com, LLC