Home News A Guide to Biden’s Student Loan Forgiveness

A Guide to Biden’s Student Loan Forgiveness

A Guide to Biden’s Student Loan Forgiveness

The crippling burden of student loans is an all too true reality for many, a hindering other facets of life. Following through on his promise to provide solutions to the mounting student debt crisis, the Biden administration unleashed a three-part plan to cancel $10,000 of student debt for low to middle-income borrowers.

When it comes to taking advantage of the opportunity to reduce student debt, here’s what you need to know:

Targeted debt relief:

The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.

Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). To ensure a smooth transition to repayment and avoid unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.

More manageable student loans for current and future borrowers:

Cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers. 

When will I be able to apply for forgiveness?

The application is expected to be available by early October. You can sign up to be notified when it is available through the Department of Education’s website or the StudentAid.gov

After submitting the application, you can expect the student loan relief within four to six weeks.

Will I have to pay taxes on the amount of debt canceled?

Borrowers will not have to pay federal income tax on the student loan debt forgiven, thanks to a provision in the American Rescue Plan Act that Congress passed last year.

But it’s possible that some borrowers may have to pay state income tax on the amount of debt forgiven. There are a handful of states that may tax discharged debt if state legislative or administrative changes are not made beforehand, according to the Tax Foundation. The tax liability could be hundreds of dollars, depending on the state.

I’m a current student. Am I eligible for forgiveness?

Yes, some current students are eligible. Eligibility for borrowers who filed the Free Application for Federal Student Aid, known as the FAFSA, as an independent will be based on the individual’s own household income.

Eligibility for borrowers who are enrolled as dependent students, generally those under the age of 24, will be based on parental income for either 2020 or 2021.

I have student debt from graduate school. Am I eligible for forgiveness?

Yes, if your income meets the eligibility threshold.

I’m a parent and took out a Parent PLUS loan. Am I eligible?

Yes, if your income meets the eligibility threshold. A parent borrower with federal Parent PLUS loans for multiple children is still only eligible for up to $20,000 of loan forgiveness.

Update: On Thursday, though, the department quietly changed that language. The guidance now says, “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.”


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