What’s Going on with Student Loan Forgiveness?

If you have student loans—as 42 million+ other Americans do—you’re probably wondering about the Biden-Harris Administration’s student debt relief program and how it’ll affect your finances.

The student debt relief program plans to forgive federal student loans: up to $10,000 for many borrowers and up to $20,000 for borrowers who received a Pell grant. Many people with student loan debt stand to benefit. In fact, “An estimated 95% of borrowers will benefit from cancellation, and about 90% of the benefits of cancellation will go to borrowers who earn less than $75,000.”

However, lawsuits are delaying the program rollout and the administration has, at the time of writing, stopped accepting applications for student loan forgiveness.

Here’s what’s happening: Several states challenged the program, arguing that President Biden’s plan represents an overreach of authority. A judge in Texas also rejected the plan, and the federal appeals court’s injunction has blocked the program.

The program page notes that the administration is “seeking to overturn those [court] orders” so applications can resume2. If you’ve already submitted your application, don’t worry—the page also says the administration is holding on to the applications they’ve received.

The big takeaway? Student loan forgiveness has not been canceled.

So, if you’re eligible for student loan forgiveness, what does all of this mean for you? It means you should monitor the situation—and get ready to submit your application once the process starts moving again!

Who Qualifies for Student Loan Cancellation?

Keep in mind that the student debt relief program will only forgive federal student loans—private loans are excluded. If you have federal student loans, other factors affect your eligibility.

The student debt relief program has an income threshold. Individuals who make less than $125,000 per year qualify for forgiveness, as do households whose annual income is less than $250,000.

Relief is also capped based on what you owe: if you are eligible for $20,000 in forgiveness (that is, you meet the income threshold and received a Pell Grant) but only owe $13,000, then the $13,000 will be forgiven.

Parent PLUS loans, Federal Family Education Loan Program (FFELP), and unsubsidized direct graduate and graduate PLUS loans all qualify for forgiveness, as do federal loans that are in default.

Do I Still Qualify for Student Loan Forgiveness if My Loans are Paid Off?

It’s possible that you will qualify for some form of forgiveness, including reimbursement, if you paid off your student loans during the pandemic. Those who paid off their loans before the payment pause are not eligible.

Keep an eye on the U.S. Department of Education—they’re the ones who will announce what’s going with loans paid off during the pause. That information should be available soon!

What Do I Do About My Remaining Student Debt?

If you qualify for forgiveness but the program won’t cover everything you owe, now is a great time to look at your budget and start making plans for your future payments.

Remaining student loan debt balances will be re-amortized after forgiveness is processed, which means the monthly amount you owe will be adjusted (and will likely be smaller) based on the new total balance.

However, your time to pay everything off will stay the same. Your student loan servicer will have updated loan payment information as the program rolls out.

What’s Next in Student Loan Forgiveness?

The student loan debt forgiveness situation is fluid and likely to remain complex as lawsuits make their way through the court system.

Stay up-to-date on the latest developments so you don’t miss important information: sign up for email alerts from the U.S. Department of Education (choose the “Federal Student Loan Borrower Updates” option right at the top).

Prepared by a third-party. 

1. Helhoski, A. (2022, Nov. 13). “Biden cancels $10K in student debt. Here’s who gets it.” https://www.nerdwallet.com/article/loans/student-loans/biden-cancels-10k-in-student-debt-heres-who-gets-it

2. U.S. Department of Education. (n.d.). “The Biden-Harris Administration’s Student Debt Relief Plan Explained.” https://studentaid.gov/debt-relief-announcement

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