Editor's Note: Since the writing of this article, the federal student loan payment pause has been extended into 2023 as the Supreme Court decides whether the Biden-Harris Administration’s Student Debt Relief Program can proceed. The U.S. Department of Education announced loan repayments may resume as late as 60 days after June 30, 2023.
Students currently enrolled in college and graduate school are eligible to apply for forgiveness of up to $20,000 of the federal student loans they’ve received if they meet certain family income requirements, according to information posted by Federal Student Aid (FSA), an office of the U.S. Department of Education (DOE).
When President Joe Biden’s plan for one-time loan cancellation was announced in August, it was clear that college graduates with federal loans were eligible, as were those who had dropped out of college but still needed to pay back their federal loans.
Now it has become apparent that students enrolled in college before June 30, 2022, will also be able to apply for federal loan forgiveness.
“Borrowers are eligible for debt relief regardless of whether they’re in repayment, in school, or in grace, as long as they meet the income requirements and have eligible loans,” according to the FSA Fact Sheet “One Time Student Loan Debt Relief .”
Recommended: Student Loan Forgiveness: Programs for Relief and Mass Forgiveness
What Are the Requirements for Students to Apply for Forgiveness?
Current students can apply for forgiveness for federal loans if they received them before June 30, 2022. (Unfortunately, this means that freshmen who started this fall aren’t eligible.) If the students are dependents of their parents, FSA will be looking at the annual income of the parents to certify eligibility, not the student.
“If you were enrolled in school as a dependent student for financial aid purposes between July 1, 2021, and June 30, 2022, your eligibility is based on parent income. After you fill out your own application form, we’ll contact you so your parent can complete a Parent Income Form,” explains the FSA Fact Sheet.
Current undergraduates and graduate students can apply for forgiveness, as can those who did not complete their degree. “Current students and borrowers who have federally held undergraduate, graduate, and Parent PLUS loans that were distributed on or before June 30, 2022 are eligible for the relief, said Megan Walter, a policy analyst for the National Association of Student Financial Aid Administrators,” in U.S. News & World Report.
For dependent students, the important question is “What is the income of your parents?” The income cutoff for this one-time debt cancellation is $125,000 for a single parent or $250,000 for the household. If the student’s parents meet this eligibility requirement, then the student could receive up to $10,000 in debt relief.
As for the $20,000 in debt relief that has been announced, the only students eligible to apply for it are those who have already received a Pell Grant and whose parents’ household incomes do not exceed $250,000.
A Pell Grant is awarded to undergraduate students with low or moderate income. If you’re unsure, you can log in to StudentAid.gov to see if you received a Pell Grant.
Recommended: How to Apply for Biden’s Student Loan Forgiveness
When Will the Loan Forgiveness Application Be Available?
The application for one-time federal student loan forgiveness went live online on Oct. 17, 2022. After you apply, the DOE will determine your eligibility and will contact you if they need more information. Your loan servicer will notify you when your relief has been processed.
Nearly 8 million borrowers may be eligible to receive relief without applying for it because the DOE already has their income information. But if you are uncertain whether you fall into that group, it’s recommended that you fill out the application.
Qualified borrowers whose repayments are set to resume or start in 2023 are advised to apply without delay in order to receive relief before the pause on all federal loan payments expires after Dec. 31, 2022.
Which Federal Student Loans Are Eligible for Forgiveness?
Subsidized loans, unsubsidized loans, parent PLUS loans, and graduate PLUS loans held by the Department of Education (ED) are eligible for forgiveness programs. The following specific types of federal student loans with an outstanding balance as of June 30, 2022, also qualify for relief:
• William D. Ford Federal Direct Loan (Direct Loan) Program loans
• Federal Family Education Loan (FFEL) Program loans held by ED or in default at a guaranty agency
• Federal Perkins Loan Program loans held by ED
• Defaulted loans (includes ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins loans held by ED)
Consolidation loans are also eligible for relief, as long as all of the underlying loans that were consolidated were ED-held loans and were disbursed on or before June 30, 2022.
Additionally, consolidation loans comprised of any FFEL or Perkins loans not held by ED are also eligible, as long as the borrower applied for consolidation before Sept. 29, 2022, says the FSA website.
What About Private Student Loans?
Private (non-federal) loans are not eligible for Biden’s debt relief. Also, if you consolidated federal loans into a private loan, the consolidated private loan is not eligible for debt relief. Once you refinance, you cannot apply for any of Biden’s forgiveness programs for that loan.
Will the Canceled Student Loan Debt be Taxable?
One-time student loan debt relief won’t be taxed at the federal level. Some states may be taxing this debt relief, however, so check with your state of residence for the latest information.
The FSA site said, “If you would like to opt out of debt relief for any reason — including because you are concerned about a state tax liability — contact your loan servicer by phone or email and tell them that you don’t want to receive one-time student loan debt relief.”
Recommended: What Biden’s Student Loan Debt Relief Means for Your Taxes
Is Federal Student Loan Relief a Certainty?
Biden’s debt relief plan may face obstacles. The burden placed on students by their large loans has been a burning controversy for years. Some 43 million Americans are paying down their student loans. The average student debt per person is over $37,000, with half of all student borrowers still owing $20,000 more than 20 years after they entered school.
When President Biden announced his student loan relief plan in August, he said, “In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.”
Biden has emphasized that the debt relief targets low- and middle-income families.
Nonetheless, the relief plan has met with opposition. Some say it will worsen inflation, others believe that Biden does not have the authority for a debt cancellation. And there are those who say that debt relief is unfair to people who made personal sacrifices to pay off their loans without government forgiveness.
Several lawsuits have been filed to try to halt the one-time debt cancellation. As of October 12, none had succeeded in stopping Biden’s relief plan.
Recommended: What You Need to Know About the Challenges to Biden’s Student Loan Forgiveness
Current students are eligible for President Biden’s one-time student loan debt forgiveness of up to $20,000 if their federal loans were disbursed before June 30, 2022, and if income criteria is met. If the student is a dependent, the annual income the FSA will be looking at is that of the parents, not the student. That income can’t exceed $125,000 for a single parent or $250,000 for the household.
3 Student Loan Tips
- Can’t cover your school bills? If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.
- Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.
- Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.
Recommended: FAFSA Guide
How old do student loans have to be to qualify for Biden’s forgiveness plan?
Federal student loans received by a student before June 30, 2022 will be eligible for one-time relief as long as the income requirement for eligibility is met.
How long do I have to apply for debt relief?
Once the application is live, you’ll have until December 31, 2023, to submit your application for student loan debt relief.
Photo credit: iStock/Drazen Zigic
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