On August 24, 2022, President Joe Biden announcedopen_in_new that his administration will be forgiving (cancelling) up to $10,000 in student loan debt for millions of borrowers. Please read the following to learn more about the three-part plan, the types of loans this plan applies to, and which loan borrowers are eligible for this treatment.
Currently and formerly enrolled undergraduate, graduate, and parent PLUS loan borrowers eligible for student loan debt forgiveness include:
- Direct Loan borrowers with Direct Loans first disbursed on or before June 30, 2022;
- Direct PLUS borrowers (parent and graduate) with Direct PLUS Loans first disbursed on or before June 30, 2022;
- Direct Consolidation Loan borrowers for which the underlying consolidated Direct Loans have a first disbursement date on or before June 30, 2022;
- Direct Consolidation Loan borrowers for which all of the underlying Family Federal Education Loan (FFEL) Program loans were held by the U.S. Department of Education (ED) and have a first disbursement date on or before June 30, 2022;
- FFEL borrowers whose FFEL loans have been transferred to ED for servicing (so they are federally held) and have a first disbursement on or before June 30, 2022;
- FFEL borrowers with FFEL Program loans held by ED or in default at a guaranty agency and have a first disbursement on or before June 30, 2022;
- Federal Perkins Loan borrowers with Perkins Loans held by ED and have a first disbursement on or before June 30, 2022; and
- Defaulted borrowers with loans (includes ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins Loans held by ED).
Private (nonfederal) loans are not eligible for forgiveness. If the borrower consolidated federal loans into a private (non-federal) loan, the consolidated private loan is not eligible for debt forgiveness. ED is assessing whether to expand eligibility to borrowers with privately owned federal student loans, including FFEL and Perkins Loans.
Only federal student loans with an outstanding balance as of June 30, 2022, are eligible. Students who are enrolling after June 30, 2022 and who have loans with first disbursements after June 30, 2022 are not eligible for this forgiveness. Cash management rules in 34 CFR 668.164 continue to apply, and the school cannot retroactively disburse loans in order to qualify students for forgiveness.
FFEL borrowers may consolidate into a Direct Consolidation Loan in order to qualify for the loan forgiveness. Qualification for debt relief then will be based on the first disbursement dates of the underlying loans and not on the date of the consolidation loan (i.e., consolidation does not "reset the clock" for these borrowers). NASFAA is still awaiting confirmation on whether these borrowers are required to consolidate into a Direct Consolidation Loan and what the deadline for consolidation might be.
If borrowers are unsure of their loan type, as a general rule, if they were benefiting from the repayment pause, they have loans that qualify.
Final extension of the student loan repayment pause
To ensure a smooth transition to repayment and prevent unnecessary defaults, the Biden-Harris Administration will extend the pause a final time through December 31, 2022, with payments resuming in January 2023.
Providing targeted debt relief to low- and middle-income families
Eligibility: Borrowers are eligible for this relief if their individual income in 2020 or 2021 is less than $125,000 or $250,000 for married couples or heads of households.
- Pell recipients (received at any time during their undergraduate): up to $20,000
- Non-Pell recipients who meet eligibility: up to $10,000
In addition, borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. This is because of time-limited changes that waive certain eligibility criteria in the PSLF program. These temporary changes expire on October 31, 2022. For more information on eligibility and requirements, go to PSLF.govo pen_in_new.
Make the student loan system more manageable for current and future borrowers
The rule would:
- Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
- Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
- Cover the borrower's unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower's loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.
Do I need to do anything to extend my student loan pause through the end of the year?
- No. The extended pause will occur automatically.
What do I need to do in order to receive loan forgiveness?
- Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.
- If the U.S. Department of Education doesn't have your income data, the Administration will launch a simple application which will be available by early October.
- If you would like to be notified when the application is open, please sign up at the Department of Education subscription pageopen_in_new.
- Once a borrower completes the application, they can expect relief within 4-6 weeks.
- We encourage everyone who is eligible to file the application, but there are 8 million people for whom we have data and who will get the relief automatically.
- Borrowers are advised to apply before November 15th in order to receive relief before the payment pause expires on December 31, 2022.
- The Department of Education will continue to process applications as they are received, even after the pause expires on December 31, 2022.
What is the Public Service Loan Forgiveness Program?
- The Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on your federal student loans after 120 payments working full-time for federal, state, Tribal, or local government; military; or a qualifying non-profit.
- Temporary changes, ending on Oct. 31, 2022, provide flexibility that makes it easier than ever to receive forgiveness by allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF.
- Enrollments on or after Nov. 1, 2022 will not be eligible for this treatment. We encourage borrowers to sign up today. Visit PSLF.gov to learn more and apply open_in_new.
See also the following resources gathered by the National Association of Student Financial Aid Administrators (NASFAA) for additional guidance and answers: