On Wednesday, Aug. 24, 2022, the Biden-Harris Administration and the U.S. Department of Education announced a federal student debt cancellation plan. According to the announcement, “the U.S. 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.”
The Federal Student Aid website will update information and details and will be the source for further announcements.
KEY TAKEAWAYS AND NEXT STEPS
- There will be a final extension of the student loan repayment pause. Federal loan repayment is deferred until Dec. 31, 2022.
- Borrowers who were dependent, enrolled students in the 2021-22 academic year will be eligible for relief based on parental income, rather than their own income.
- The best place to get your total federal debt and to check if you received a Pell Grant is the Federal Student Aid website. You will need your federal student aid ID (FSA ID) to login and access your information. If you did not create one or yours has expired, you will need to create a new FSA ID.
- This debt cancellation plan applies to federal student loans, including Federal Direct (Stafford) Subsidized and Unsubsidized Loans and Parent PLUS loans that had an initial disbursement as of June 30, 2022. The Perkins Loan and private loans are not included under this plan.
- Sign up for “Federal Student Loan Borrower Updates” for notification of when the process officially opens. The U.S. Department of Education will use 2021-22 FAFSA income data; if you didn’t file a 2021-22 FAFSA, an application will be available in September.
- This plan also includes a time-limited update to the Public Service Loan Forgiveness Program and offers the possibility to have all your student debt forgiven. This is relevant for borrowers who are employed by nonprofits, the military, or federal, state, Tribal or local government. You must apply by Oct. 31, 2022; applications are open now.
According to a U.S. Department of Education spokesperson, borrowers (students and/or parent(s) can still request refunds for any federal student loan payments made since March 13, 2020, when the first repayment pause was announced. Additionally, any amount paid after Aug. 24, 2022.
The Biden Administration's Student Loan Debt Plan | ||||
Who | Income | Total forgiveness with Pell Grant | Total forgiveness without Pell Grant | |
single | $125,000 | $20,000 | $10,000 | |
married | $250,000 | $20,000 | $10,000 | |
| Student loan pause extended one final time through Dec. 31, 2022 Disbursement before June 30, 2022 (loan default before March 31, 2020) Application process will start in September 2022 | ||||
| New Income-driven Repayment - (IDR) Plan Federal undergraduate loans | ||||
| Discretionary Income | Monthly Payment | Loan Amounts | Interest | Repayment |
| 225% of federal poverty level (equivalent to $15/hr.) | $0 | $12,000 or less | unpaid amount is covered by U.S. Department of Education | 10 years |
| 5% of discretionary income | based on income | $12,000 or more | accrued interest unpaid/taxable income during forgiveness | 10 years |
| Potential new income-driven repayment - (IDR) Plan - effective date July 1, 2023 Final rule making on Nov. 1, 2022 | ||||
| Fresh Start Initiative (FSI) Propose is for borrowers in default to receive Title IV Federal Financial Aid | ||||
| removal of federal default loan | do not impact the one rule for default | letter of acknowledgement | updating National Student Loan Data System - TBA | borrowers in good standing qualify for student loan debt program |
This infographic applies to independent, currently enrolled students and individuals not currently enrolled who filed federal taxes as single or head of household. For dependent, currently enrolled students, eligibility for relief will be based on parental income. More information is available at NAFSAA.org.