Student Loans FAQ
The Student Loan Forgiveness Application is now open: https://studentaid.gov/debt-relief/application
Debt Forgiveness
On August 24, 2022, President Biden announced targeted forgiveness of $10,000 for student borrowers with federal student loans and an individual income under $125,000 or a household income of under $250,000. An additional $10,000 will be forgiven for borrowers who received a Pell Grant while in college.
End of the Loan Repayment Pause
The President also announced a final extension of the student loan repayment pause. Borrowers will have to resume their payments on January 1, 2023.
Repayment Changes
President Biden also proposed changes, through a forthcoming rule, to income-driven repayment (IDR) plans. Specifically, the proposed changes would:
- Cap monthly payments for undergraduate loans at 5% of their discretionary income;
- Forgive balances after 10 years of payments (instead of 20 years) for borrowers with loan balances of $12,000 or less;
- Raise the amount of income that is excluded from calculations from 150% of the federal poverty line to 225%, lowering the amount owed per month for borrowers in IDR;
- 225% of the poverty level is what a $15 minimum wage worker earns annually
- This change means borrowers making under 225% will not have to make a payment
- Cover borrowers’ unpaid monthly interest, so long as they make their monthly payments on time.
- Starting in the summer of 2023, borrowers will be able to allow the Department of Education to automatically pull their income information year after year, avoiding the hassle of needing to recertify their income annually.
Public Service Loan Forgiveness
- The Administration also previously announced additional changes to the Public Service Loan Forgiveness (PSLF) Program, including the time limited waiver and proposed regulatory changes to bring about forgiveness for more public servants.
Time Limited Waiver
Time-limited changes to PSLF Program rules allow borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF in order to move more of our nation’s public servants towards forgiveness. Borrowers must take action before October 31, 2022 in order to receive credit.
More payments qualify for PSLF including partial, lump sum, and late payments.
Borrowers who received Teacher Loan Forgiveness can count that same qualifying period of service towards PSLF as well.
Forgiveness is possible even during periods of unemployment or not being employed by a qualifying employer at the time of application and forgiveness.
Borrowers with FFEL or Perkins Loans are eligible, so long as they are consolidated into Direct Loans.
Periods of repayment under any plan count.
Periods of repayment on loans before consolidation count, even if on the wrong repayment plan, or if they were paid late or for less than the amount due.
More information on the waiver, including how to apply and take advantage of the waiver, is available here.
Proposed Regulatory Changes
On July 6, 2022, the Department of Education proposed the following regulatory changes to the PSLF program, with a final rule expected to be announced in November 2022 and go into effect on July 1, 2023.
More payments will qualify for PSLF including partial, lump sum, and late payments.
Certain deferments and forbearances (such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service) will count towards PSLF.
Expanded eligibility for some non-tenured higher education instructors.
More information on the proposed rule changes is available here.
FAQs
Which loans are eligible?
- The following types of federal student loans with an outstanding balance as of June 30, 2022, are eligible for relief. In general, if your federal student loan was eligible for the payment pause during the pandemic, it will be eligible for forgiveness.
- William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Subsidized loans
- Unsubsidized loans
- Parent PLUS loans
- Graduate PLUS loans
- Consolidation loans, as long as all of the underlying loans that were consolidated were first disbursed on or before June 30, 2022
- Federal Family Education Loan (FFEL) Program loans held by the Department of Education or in default at a guaranty agency
- Federal Perkins Loan Program loans held by the Department of Education
- Defaulted loans (includes those held by the Department of Education or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins loans held by the Department of Education).
Which loans are ineligible?
- Private loans are ineligible for forgiveness.
- As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans. Borrowers with FFEL Program loans and Perkins Loans not held by ED who have applied to consolidate into the Direct Loan program prior to Sept. 29, 2022, are eligible for one-time debt relief through the Direct Loan program.
- ED is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED, including FFEL Program loans and Perkins Loans, and is discussing this with private lenders.
How can borrowers get forgiveness?
- Borrowers should make sure now that their contact information is up to date with both the Department of Education and their loan servicers.
- The Department of Education has income data for more than 8 million borrowers who will have their loans forgiven automatically.
- If the Department of Education doesn't have your income data, you can use the application here. Borrowers are encouraged to apply before November 15th to receive relief before the payment pause expires on December 31, 2022.
- Once a borrower completes the application, they can expect relief within 4-6 weeks.
- Even if a borrower believes their income data may be on file, the Department of Education still encourages all eligible borrowers to apply.
- Borrowers have until December 31, 2023 to submit their applications. Applications will be processed as they are received through the end of 2023, even after the payment pause expires on December 31, 2022.
How will the refund on past payments work?
- Borrowers who made payments during the interest and payment pause (which began March 13th, 2020) are eligible to request a refund on those payments.
- The Department of Education estimates 1.2% of borrowers made payments on student loans during the pause to be eligible for these refunds.
- Borrowers will automatically receive a refund if their application for cancellation is approved and their voluntary payments during the payment pause brought their balance below the maximum debt relief amount they are eligible to receive but did not pay off their loan in full
- Other borrowers may be eligible for a refund and are encouraged to contact their loan servicer to increase their debt balance back up to the March 2020 amount to increase the relief they receive within the $10,000 or $20,000 limits.
- Refunds will be sent directly to the individual (or entity) that made the payment.
When will borrowers have to resume payments?
- Payments will resume on January 1st, 2023. Borrowers should receive a billing notice at least 3 weeks before the first payment is due. If they don’t they should contact their loan servicer before then for specifics on what they owe and when payment is due.
- The $10-20,000 in forgiveness may affect some borrower’s monthly payment amounts, but details on the recalculations are forthcoming.
- Information on steps borrowers can take ahead of the resumption of payments is available here.
What happens if a borrower was in default?
- Defaulted loans are eligible for debt relief. If their debt exceeds $10,000, their loans will be deemed current, allowing them to enroll in a repayment plan without having to go through additional hurdles and enroll in an option that is affordable for them.
- The new Fresh Start program means defaulted borrowers are no longer cut off from receiving federal student aid, including Pell Grants.
What if a borrower has multiple loans?
- The Department of Education (ED) will determine how relief gets applied to the loans. Specifically, they will apply relief in the following order:
- Defaulted ED-held loans
- Defaulted commercial FFEL Program loans
- Non-defaulted Direct Loan Program loans and FFEL Program loans held by ED
- Perkins Loans held by ED
- If a borrower has multiple loans in a program type (e.g., multiple Direct Loan Program loans), ED will apply the relief in the following order:
- Apply relief to loans with the highest statutory interest rate.
- If interest rates are the same, apply to unsubsidized loans prior to subsidized loans.
- If interest rate and subsidy status are the same, apply to the most recent loan.
- If interest rate, subsidy status, and disbursement date are the same, apply to the loan with the lowest combined principal and interest balance.
If a parent took out Parent PLUS loans for their child and has loans from their own pursuit of higher education, how will forgiveness work?
- So long as the parent makes less than the income caps, the Department of Education will forgive loans on a borrower-basis, not on a student basis. Thus, the parent can receive forgiveness for their Parent PLUS loans as well as any loans they took out for their own education, up to the $10,000 or $20,000 limit.
Does it matter when a borrower received a Pell Grant, or for how many semesters they received a Pell Grant to be eligible for $20,000 in forgiveness?
- No, it does not matter when or for how long a borrower received the Pell Grant to qualify for $20,000 in forgiveness. For example, if a borrower received a Pell Grant during their undergraduate education, but did not take out a loan until their graduate education, they are still eligible for $20,000 in forgiveness. Additionally, if a borrower only received a Pell Grant for one semester, they are still eligible for the additional forgiveness.
How does this forgiveness interact with the PSLF Program?
- The debt cancellation will happen independently of any partial or complete cancellation from PSLF. The Department of Education will identify borrowers who submit both an application for the one-time debt forgiveness and a PSLF form. The one-time forgiveness will be applied to those eligible, and if the borrower is determined to be eligible for a PSLF discharge as well, the Department will adjust the loan and apply the PSLF discharge. Borrowers may receive a refund on certain eligible payments made after the borrower has already completed their 120 payments.
Will this relief be treated as taxable income?
- No. Thanks to the American Rescue Plan, debt relief will not be treated as taxable income for federal income tax purposes. State and local tax implications will vary.
How many people will be impacted by forgiveness?
Roughly 20 million borrowers are eligible to have their entire debt wiped out, while another roughly 21 million borrowers are eligible to have part of their debt erased.
Are there any additional resources?
- Student Loan Forgiveness Application
- White House Fact Sheet
- StudentAid.Gov Explainer
- StudentAid.Gov FAQ
- Sign up for Federal Student Loan updates from the Department of Education
- Sign up for text alerts through your StudentAid.Gov account
- For additional questions, borrowers are advised to contact their loan servicers.