On August 24, 2022, President Biden announced a one-time federal student loan forgiveness program. This is not a complete wipe of student loans but partial forgiveness for those who qualify. The amounts forgiven are expected to be between $10,000 to $20,000.
Additionally, the administration extended the student loan payment pause for a fifth time until December 31, 2022. The current payment pause means students do not have to make payments on their outstanding loans. Interest does not accumulate in this period either. The payment pause started on March 13, 2020.
Applications for forgiveness will open in October. Some students will automatically receive forgiveness and do not have to apply for it. Students should check studentaid.gov for any updates on when applications will open.
The government determines forgiveness based on income. Students enrolled in an income-driven repayment plan likely do not need to apply. However, there's nothing wrong with applying to cover your bases.
Documents needed when applying include:
- Income information (tax documents)
- Loan servicer
- Type of student loan
The amount of federal student loans is not a factor in determining qualification. Those making less than $125,000/yr (single) or $250,000/yr (married) meet the financial qualifications for student loan forgiveness. Up to $20,000 can be forgiven in federal student loans. That includes $10,000 for Pell Grant recipients. A recent change excluded those with federal student loans handled by private banks. This means those with federal family education loans (FFEL), over 4 million people, or Perkins Loans can no longer apply. The FFEL and Perkins are older student loans issued before 2010.
The estimated cost of the student loan forgiveness program is $400 billion, which has led to several challenges in court.
To see what type of loan you have, visit studentaid.gov. You can also find more information on the loan forgiveness program there.