Who qualifies for the student loan forgiveness program

The plan would cancel up to $20,000 in debt for current federal student loan borrowers and parent PLUS loan borrowers.

• Current federal student loan borrowers and parent PLUS loan borrowers who obtained loans before June 30, 2022, may qualify for loan cancellation.
• Borrowers must meet certain income requirements. Dependent students must use their parents' or guardians' income to determine eligibility.
• The administration has also proposed a new rule that would change future repayment plans.
• An ongoing legal challenge may stall or derail the Biden administration's plans for loan forgiveness.

President Joe Biden announced on Aug. 24 that federal student loan borrowers will soon see up to $20,000 in debt forgiveness.

For nearly 8 million borrowers, debt relief will be automatic due to relevant income data already being available to the Department of Education.

But the remaining 37 million borrowers may be wondering how to qualify for debt forgiveness. Here's what you need to know.

Frequently Asked Questions

• Who Qualifies for Loan Cancellation Under the New Plan?
• How Much Debt Will Be Canceled?
• How Do I Apply for Loan Forgiveness?
• How Does the Plan Affect Future Loan Repayments?

• Does My Pell Grant Amount Matter?
• Are My Canceled Loans Taxable?
• What Can I Do If I Have a FFEL Loan?
• What If I Paid Off My Loans During the Payment Pause?
• How Are Legal Challenges Impacting Forgiveness?

Who Qualifies for Loan Cancellation Under the New Plan?

All federal student loan borrowers who meet the eligibility criteria listed below can qualify for debt cancellation.

Eligibility for Biden's Student Loan Cancellation Plan

Borrowers who are employed by nonprofits, the military, or federal, state, tribal, or local governments may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. The PSLF program forgives the remaining balance on federal student loans after 120 payments working full time.

How Much Debt Will Be Canceled?

The Department of Education will provide up to $10,000 in debt cancellation to non-Pell Grant recipients and up to $20,000 in debt cancellation to borrowers who received a Pell Grant as an undergraduate. Borrowers are eligible if their individual income is less than $125,000 or $250,000 for married couples and/or households.

Relief is capped at the amount of borrowers' outstanding debt. For example, if you are a Pell Grant recipient with $15,000 of debt, you will receive $15,000 in debt relief as opposed to $20,000.

How Do I Apply for Loan Forgiveness?

The most important step for debt relief eligibility is making sure your contact information is up to date with your loan servicer and that your income data is up to date with the Department of Education. If you are unsure who your loan servicer is, check out the Federal Student Aid website.

If your income information is not current with the Education Department, or you are unsure if they have it, you should submit an online application for relief.

The official application launched on Oct. 17. Federal Student Aid stopped taking applications on Nov. 11 after multiple courts issued orders blocking student debt relief.

Before the pause on applications, here’s what borrowers needed to complete the form:

• First name
• Last name
• Social Security number
• Date of birth
• Phone number
• Email address

The pause on federal student loan repayments is set to end after Dec. 31.

You can sign up to be notified when the application is open on the Department of Education's subscription page.

Approximately 8 million borrowers are eligible to have their debt automatically erased, according to the Department of Education. This likely refers to borrowers enrolled in an income-driven repayment (IDR) plan, as borrowers must submit annual salary updates to calculate their monthly payment.

As of March 2022, Federal Student Aid said 8.4 million borrowers with a federal direct loan were enrolled in an IDR plan.

Borrowers who verified income through the Free Application for Federal Student Aid (FAFSA) within the past two years may also qualify for automatic forgiveness.

How Does the Plan Affect Future Loan Repayments?

Biden's plan includes extending the student loan repayment pause through Dec. 31, 2022. Repayments will begin again in January 2023.

The administration has additionally proposed a rule that would create a new income-driven repayment (IDR) plan. Under the rule, borrowers would pay no more than 5% of their discretionary income monthly on undergraduate loans instead of 10%, and loan balances of $12,000 or less would be forgiven after 10 years of payments instead of 20 years. Graduate school debt also qualifies, but it must be repaid at 10% of discretionary income.

The rule would also raise the amount of income that is considered nondiscretionary and cover borrowers' unpaid monthly interest so borrowers' balance wouldn't grow as long as they are making monthly payments.

The Department of Education states that the administration is working to implement the changes as quickly as possible, so stay tuned for further updates.

Does My Pell Grant Amount Matter?

All Pell Grant recipients will be eligible for $20,000 in federal student loan forgiveness.

Mark Kantrowitz, a student debt expert and author on the subject, told BestColleges there are no stipulations on how much in Pell Grants someone must have received to qualify for the total cancellation amount.

That means someone who received a Pell Grant for just one semester can have up to $20,000 in loan debt canceled, just the same as someone who received the maximum Pell Grant award for four years of study.

Kyra Taylor, a student loan attorney at the National Consumer Law Center, said during a panel from the Student Debt Crisis Center that it also doesn't matter when a borrower received the Pell Grant.

For example, a borrower who received a Pell Grant for undergraduate studies, paid off their undergraduate loans, and then took out loans for graduate school would still be eligible for up to $20,000 in forgiveness. What matters is that a borrower received a Pell Grant at any point before June 30, 2022.

Not sure if you received a Pell Grant while in school? Here’s how to check.

Are My Canceled Loans Taxable?

Borrowers will not have to pay any federal taxes for loan balances that ED discharges.

Biden’s 2021 American Rescue Plan extended a temporary waiver so that all loans forgiven would not be taxed like income. That waiver is not set to expire until Jan. 1, 2026, which is well after the expected timeline for forgiveness in Biden’s recent plan.

Borrowers in some states, however, may have to pay taxes on discharged loans.

According to the Tax Foundation, that includes borrowers in:

• North Carolina
• Arkansas
• Minnesota
• Mississippi
• Wisconsin

Canceled student debt in California may not be tax exempt. However, California lawmakers vowed that the state would not tax any loan amounts forgiven through Biden’s plan.

What Can I Do If I Have a FFEL Loan?

Sept. 29 is an important date to remember for Federal Family Education Loans (FFEL) borrowers.

Before this date, the Department of Education recommended that those with commercially held FFEL loans - which encompasses over 4 million borrowers that didn’t enjoy the pause on student loan payments - consolidate their loan into the Direct Loan program. Doing so would qualify these borrowers for Biden’s broad relief program.

However, the department updated its guidance for FFEL borrowers on Sept. 29.

The update said borrowers who applied to consolidate their FFEL loan before this date would still qualify for debt forgiveness. However, borrowers who submit applications on that day or after would not qualify.

A Department of Education spokesperson confirmed with BestColleges that the department is still exploring “legally-available options” to offer relief to borrowers with commercially held FFEL loans.

Approximately half of FFEL borrowers already qualify for relief because the federal government services their loan. These borrowers were eligible for the student loan payment pause.

What If I Paid Off My Loans During the Payment Pause?

Student loan borrowers haven’t needed to make payments on their federal loans since March 2020. However, due to the hold on accumulating interest, approximately 9.1 million have made at least one payment since April 2020, according to the Office of Federal Student Aid.

Those borrowers can still attain debt forgiveness.

Those with remaining student loan debt can apply for relief. If they would have qualified for additional cancellation beyond what their remaining balance is, ED will refund the difference. That means someone who qualifies for $10,000 but only has $6,000 in outstanding debt may have up to $4,000 refunded back to them, depending on how much they paid during the pause.

Borrowers who completely paid off their loan during the pause must contact their loan servicer. The servicer will then refund what’s requested and add that back to the outstanding balance. ED can then erase the debt.

How Are Legal Challenges Impacting Forgiveness?

The timeline for forgiveness is currently up in the air due to an ongoing legal battle.

Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina on Sept. 29 filed a joint lawsuit against President Biden and Secretary of Education Miguel Cardona in an attempt to block student loan forgiveness. A federal judge initially threw out the case, but the 8th U.S. Circuit Court of Appeals later issued a stay as it contemplates an appeal.

With that stay in place, the Department of Education may not forgive loans under the plan.

According to Cardona, 26 million borrowers applied as of Nov. 5.

Federal Student Aid stopped accepting applications on Nov. 11. A district court in Texas ruled that the program was unlawful the day prior.

What student loans are eligible for forgiveness?

Will my student loans get forgiven?

How does the student loan forgiveness work?

Is student loan forgiveness automatic?