Student Loan Forgiveness FAQs: The Details, Explained

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  • You must have federal student loans and earn less than $125,000 annually (or $250,000 per household). You can get up to $10,000 in debt cancellation. 
  • If you also received a Pell Grant during your education, you can qualify for up to $20,000 in forgiveness.

  • Nearly every type of federal student loan qualifies for forgiveness, including direct subsidized or unsubsidized loans and graduate or parent PLUS loans.
  • If your loans qualified for the federal student loan payment pause, they’re likely eligible for this forgiveness opportunity.
  • If your loans weren’t paused and are held by a private lender, the Department of Education is currently working with those third-parties to forgive your debt—though this plan hasn’t been solidified yet.
  • Private student loans aren’t eligible for forgiveness.

  • Log into your account on the Federal Student Aid site. Navigate to the “Aid Summary” page to view the loans and grants you’ve received, plus the current status of your accounts.  

  • You can still qualify for up to $20,000 of forgiveness, no matter the size or frequency of your Pell Grants. 

  • If your loans are in default, you can likely still qualify for forgiveness.
  • If collections activities were halted on your debt during the federal student loan payment pause, your loans are expected to be eligible for forgiveness. 

  • Yes, if you have parent PLUS loans or grad PLUS loans, you can qualify for forgiveness. 

  • Maybe. If your Federal Family Education loans (FFEL) were eligible for the student loan payment pause that’s been in effect since March 2020, you can qualify for forgiveness. 
  • If they weren’t eligible for the payment pause, you might still qualify for forgiveness if you take additional steps. You can consolidate your FFEL loans into a direct consolidation loan to make them eligible, according to the New York Times.

Yes, if you never finished your degree or are still in school, you can still qualify as long as your loans were disbursed by June 30, 2022.

If you used federal student loans to pay for community college, a trade program, professional degree or other alternative certification, you’re still eligible for forgiveness.

Forgiveness Process

  • The amount of debt forgiven depends on whether or not the borrower received a Pell Grant; those who did will receive up to $20,000 in debt cancellation.
  • Other borrowers (who meet the income threshold requirements) will receive $10,000 in debt cancellation.
  • If your student loan balance is less than the amount you qualify for, your relief is capped at the amount of your outstanding debt.

  • Maybe. Nearly 8 million borrowers may have debt forgiven automatically because the Department of Education already has their income data.
  • Everyone else will have to submit their income information via a simple application online that will be available by early October, according to the Department of Education.

  • Some 8 million borrowers will receive their debt cancellation automatically, since the Department of Education already has their relevant income information on file.
  • Others will have to wait until the Department of Education launches a simple online application in early October; once their application is submitted, borrowers can expect to see their debt cancellation within four to six weeks.

  • Your servicer will likely update you once your loans are forgiven. Keep an eye out for any correspondence from your servicer via email or mail, and regularly check your loan balance online.

  • Borrowers with loan balances greater than the amount forgiven will resume payments starting in January 2023. Depending on your balance, you may qualify for a newly available income-based repayment plan. 

  • Monthly payment amounts will likely be recalculated by loan servicers, especially for those who move to the new income-driven repayment plan that caps payments at 5% of their discretionary income.
  • Borrowers should stay up to date on this information by checking their loan servicer’s website and reading any emailed or mailed correspondence.

  • There are no indications that mass student loan debt forgiveness will happen again in the future.

There are growing questions around the legality of Biden canceling federal student loans. The plan is expected to face legal challenges in the coming months; however, legal experts remain divided over whether or not it will be struck down by a court.

Yes. The federal student loan forbearance (pause) period has been extended a final time through Dec. 31, 2022. After this date, federal student loan borrowers will resume monthly payments on their balances.

Taxes

  • Student loan debt relief is available to those whose adjusted gross income (AGI) from either the 2020 or 2021 tax year was under $125,000. Married couples who file taxes jointly and anyone who files as a head of household will qualify if their AGI is less than $250,000.

  • Under the Biden administration relief program, forgiven student loans aren’t taxable.

  • In some states, you may be required to pay state income tax on canceled student loan debt. According to an analysis from the nonprofit Tax Foundation, 13 states—Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia and Wisconsin—have the potential to tax forgiven student debt.

  • Although debt forgiveness typically must be reported on an IRS Form 1099-C, “Cancellation of Debt,” the IRS has directed student loan providers to refrain from filing the form for any borrower who qualifies for the Biden tax exemption.

  • No. During the last few years, the Department of Education set the interest rate at 0% on federal student loans in response to the pandemic. So, there’s been no federal student loan interest to deduct. Once the interest and federal loan payments resume in January, you’ll be able to claim a deduction for the interest even if some of your debt is canceled.
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New Income-Driven Repayment Plan

  • The proposed income-driven repayment plan will cap monthly payments to 5% of your discretionary income. Any unpaid interest will be covered by the Department of Education, meaning that interest won’t accrue and your loan balance won’t grow if you make your monthly payments.
  • If you borrowed $12,000 or less, any remaining balance is eligible for forgiveness after you’ve made regular payments for 10 years.

  • Discretionary income is the amount you have left after paying for essentials like housing and food costs. In the context of federal student loans, discretionary income is the difference between your annual income and 150% of the poverty guideline for your family size and location.
  • However, the new repayment plan calculates discretionary income more favorably by raising the amount of income that is protected from repayment. This will guarantee that no borrower earning less than 225% of the federal poverty level (about $30,578 for 2022) will have to make a payment.

  • The eligibility criteria for this repayment plan have not yet been released.

  • It’s not clear when this plan will be available for borrowers, but it almost certainly won’t be in effect until 2023. Currently, this plan is just a proposal and must go through several more administrative steps before borrowers can sign up.

  • There are five income-driven repayment plans available to federal student loan borrowers. The exact rules vary by plan, but you can expect payments to be capped at 10% to 20% of your discretionary income. After making payments for 20 or 25 years, any remaining balance can be forgiven. Not all types of federal loans are eligible for every plan.