resident Biden has stated that quality education is one of the main pillars of America's prosperity. For many Americans, education is the ticket to a better life. However, higher education prices have skyrocketed, almost tripling in a decade. Consequently, the current generation is saddled with student debt in return for at least a college degree. The burden is so heavy that it has hampered the quality of life of many people. Many students drop out and end up with mountains of debt but no degree.

The burden is cumbersome for working and middle-class families with limited income. On top of that, the pandemic hit in the worst ways. The government has temporarily suspended student loan payments. But, the worst toll will hit borrowers when it is reinstated, given the decade-high inflation and interest rates.

For this reason, President Biden developed the Biden student debt relief plan to assist middle-class and working-class borrowers with their student loan burden. This article has everything you need to know about Biden Student Loan Forgiveness and Debt Relief Plan and the steps to apply for it.

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Biden Student Loan Forgiveness and Debt Relief Plan

On August 24, 2022, President Biden announced a three-part plan for working and middle-class borrowers to help them transition back after pandemic-related support ends. The program includes an extension of student loan repayment pause, targeted loan forgiveness, and a new income-driven monthly plan.

Final Extension of Student Loan Repayment Pause

The government has temporarily suspended student loan payments because of the COVID-19-related economic crisis. The loan suspension was initiated in 2020 and has been extended multiple times due to covid and financial circumstances. For the last time, it has been extended to December 31, 2022. After that, borrowers will need to start resuming their payments from January 2023.

Targeted Student Loan Forgiveness Plan

Once student loan payments resume, borrowers must pay balloon payments. Due to decade-high inflation and interest rates, borrowers would need to pay more from their pockets, posing a high risk of default. To combat this, the U.S. Department of Education plans to forgive up to $20,000 in student loans for borrowers with annual incomes of less than $125,000 or $250,000 for married couples.

In addition, Public Service Loan Forgiveness (PSLF) program may cancel out the whole of a borrower's student debt if they are working for qualified nonprofit, armed forces, or any level of a government job.

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New Income-Driven Monthly Plan

The Biden-Harris Administration has proposed a new income-driven monthly plan to help lower and middle-income borrowers repay loans.

The new income-driven monthly plan will have the following changes:

  • Borrowers will have to pay 5% of their discretionary income for the monthly payments on student loans. The current rate is 10%- 15%.
  • The remaining balance will be forgiven if a borrower's loan balance is $12,000 or less after 10 years of payments. Currently, it is after 20 years.
  • The amount of income considered non-discretionary will be raised to protect income from repayment. In federal student loans, discretionary income is calculated as the difference between your annual income and 150% of the poverty guideline. The new plan calculates 225% of the poverty guideline.
  • The Department of Education will cover any unpaid interest. Thus, no borrower's loan balance will grow as long as they make monthly payments.

Note: The new income-driven monthly plan is currently just a proposal, and a final decision is yet to be made.

Eligibility for Student Loan Forgiveness Plan

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Income Criteria

Borrowers seeking loan forgiveness should earn less than $125,000 annually. If you are married, you should make less than $250,000 annually, regardless of the number of children and family members. One thing to note is that income eligibility is based upon your Adjusted Gross Income (AGI) from either 2020 or 2021. AGI is lower than the total wage as it considers tax deductions and adjustments, including 401(k) retirement plans.

Types of Student Loan

The loan forgiveness only applies to government or federal loans. Almost every type of federal student loan is eligible for forgiveness, including direct subsidized, unsubsidized loans, parent plus loans, and graduate loans. While precise criteria for which loans qualify remain unknown, a good rule of thumb is that if your debts are eligible for federal student loan payment pause, they are also eligible for forgiveness. Federal loans disbursed before June 30, 2022, are eligible.

There is some uncertainty as to whether a student with a Federal Family Education Loan (FFEL) held by a private company is eligible or not. Lenders and the Department of Education are working on incorporating FFEL loans, but no definitive details have yet been received. According to the U.S. Department of Education, you may qualify for debt forgiveness if you consolidate your FFEL loans to direct consolidation loans.

Any type of private student loan is not eligible. Similarly, some of the loans from the Federal Perkins Loan Program held by the college may be excluded.

Types of Borrower

All enrolled, graduate, and dropout students are eligible if they meet income eligibility. Students who take out loans as dependents will have their eligibility determined by their parent's income in 2020 or 2021. Similarly, parent borrower with federal parent plus loans for multiple children is also eligible.

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Loan Status

Even if your loans default, you can still qualify for the forgiveness program. Fresh Start Program initiated by the Department of Education can reinstate the defaulted federal loans to good standing, allowing them to be eligible for the plan.

Pell Grant

Pell Grant is a type of aid available to low-income students. You are eligible for student loan forgiveness if you received Pell Grant, regardless of size or frequency.

What Is the Amount for Student Loan Forgiveness?

If you meet all of the above criteria, you are eligible for up to $10,000 in debt forgiveness. On the other hand, Pell Grant recipients may have up to $20,000 in loans written off.

So, if you have $20,000 in debt and are eligible for $10,000 debt relief, you'll only have to pay off the remaining $5,000 loan balance. Likewise, if you have $9,000 debt outstanding and are entitled to $10,000 debt relief. Then, you will receive $9,000 as a relief, and your loan is completely wiped off.

Remember that if you paid loan payments during the pandemic hiatus and your loan balance is below the baseline of $10,000 or $20,000 for Pell grantees, you may be eligible for a refund. You can ask your loan servicer to refund the amount so that you can enjoy the maximum benefit of the student loan forgiveness plan.

Also, check out: Smart Side Jobs To Pay Off Student Loan Debt

Will the Student Loan Forgiveness Be Taxed?

As per Biden's covid-19 relief bill, student forgiveness is exempted from tax until 2025. Thus, it will not be taxed at the federal level but may be subject to tax at the state level. The expert analysis believes 13 states (Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin) have the potential to tax forgiven student debt.

Note: It is just a prediction, and there has been no final decision. So, make sure you check with your state department of revenue to learn more about it.

How to Apply for Student Loan Forgiveness?

If you fall under 8 million borrowers whose income information is accessible to the Department of Education, you will automatically receive debt relief. Nonetheless, the Department of Education will release an application form in early October to collect income information and loan forgiveness requests from remaining borrowers. Although no specific guidelines or deadlines have been defined, experts are urging borrowers to start preparing in advance.

Here's how you can prepare to apply for the student loan forgiveness program:

Source: Story set.

Verify You Meet the Income Threshold

Check-in your 2020 and 2021 tax returns to make sure that you meet the income threshold. Borrowers with annual incomes of less than $125,000, or married couples with a combined annual income of less than $250,000, will be eligible for the assistance. Don't confuse gross income and Adjusted Gross Income (AGI). Look for revenue in line 11 on your tax return form to determine your AGI.

Check Student Aid Report.

The student aid report shows the loan that you have received and the remaining balance. Get your report at studentaid.gov after logging in with your FSA ID. If you have forgotten your login information, you can recover it using your email address or phone number. Alternatively, you can ask your loan service provider. If you've lost track of who your loan servicer is, you may look them up online or call the Federal Student Aid Information Center at 800-433-3243.

Check for a Pell Grant.

Chances are that you might have received a Pell grant as part of your financial aid package. If you are unsure if you have received it or not, you can simply check at studentaid.gov. Alternatively, you can verify with the financial aid office at your University.

Ensure Your Loans Qualify

Usually, most federal loans are eligible for assistance. But, if you have private loans or the loans held by the college, your loans are not eligible. Similarly, you need to consolidate your Federal Family Education Loan (FFEL) owned by a private company to qualify for student loan forgiveness. If you don't know which loan you owe, you can simply check at Studentaid.gov or ask your loan service provider.

Gather Records

Although specifics of the application for student loan forgiveness are still being worked out, experts advise being ready to submit the paperwork as soon as possible. The government may not need an income statement from the approximately 8 million borrowers enrolled in the income-driven repayment plan. For everyone else, it's a good idea to save copies of your tax returns and loan documents for future reference.

If you were awarded a Pell Grant, take a screenshot or print off the official paperwork verifying your grant. Likewise, take a screenshot or print a copy of your current student loan balance so you can verify that the right amount of debt was canceled.

Get Updated

You should be on the edge of your seat and check on the newest updates. The application for student debt forgiveness is expected to be available in early October, and processing will take around eight weeks to deduct the loan amount.

The deadline for student forgiveness is expected to be December 31, 2022, but the experts advise you to apply before November 15, 2022. Ensure you have prepared all the documents and wait for the right time to act. It is a one-time opportunity you wouldn't want to miss.

Here are some useful websites to get student loan forgiveness updates. To avoid missing out, make sure to sign up for email notifications.


The student loan forgiveness plan is great news for students saddled with the heavy burden of student loan debt. This would free up funds that may have gone toward paying off their loans, allowing them to pursue other goals that had been pushed to the back burner. It is a once-in-a-lifetime opportunity. Thus, eligible students should proactively act and prepare all documents to grab this opportunity before it's late.


Sep 5, 2022
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