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The Biden Administration has announced student loan forgiveness that’ll save over 30 million Americans thousands of dollars. This relief plan is going down as the largest student debt relief in the country’s history. And we thought college student freebies was big.
If you’ve ever been in college, you know that student tuition debt is a major stressor, even long after graduation. These loans can affect everything from buying a house to your credit score and month-to-month budget.
The government unveiled a first version of their plan, but after state governments filed lawsuits, fewer people than originally thought will get their loans forgiven. You only have until Dec. 31, 2022, to apply, so you’ll want to know all the steps it takes to apply.
So … do you qualify for the debt relief plan? How much money could get forgiven? How do you apply for student loan forgiveness? Do past payments get refunded? What rules did President Biden roll back? We break down the new student debt relief plan for you:
What is the student loan forgiveness plan 2022?
President Joe Biden issued an executive order that’ll cancel $10,000 to $20,000 of student loan debt per person, depending on household income and whether or not you received a federal Pell Grant.
Biden said the loan forgiveness should give students some “breathing room” as a pandemic-era pause on student loan payments comes to an end in July 2023.
How much in student loans will be forgiven?
The Biden administration will cancel up to $20,000 in student loan debt per person, depending on the loan recipient’s income (or for dependents, their parents’ income).
Here’s how much student debt you could get canceled:
- Individuals making under $125,000 – $10,000
- Individuals who received the Federal Pell Grant – $20,000
- Individuals who make more than $125,000 a year aren’t eligible.
That’ll take a significant chunk out of millions of people’s outstanding college debt. According to EducationData:
- Students with an Associate Degree have, on average, $20,000 in federal student loan debt. They’ll either get it cut in half or eliminated completely.
- Students with a Bachelor’s Degree have, on average, $32,300 in federal student loan debt. They’ll see their bill cut by 31% – 62%.
- Graduate Students owed, on average, an extra $82,810 in federal loans for their graduate school tuition (on top of undergrad debt). They’ll see their bill reduced 8.6% – 17.4%
Also: Under the new student debt relief plan, monthly payments won’t exceed 5% of your monthly income. That means if you make $2,000/month, you won’t pay more than $100/month on your loans.
Who is eligible for student loan forgiveness?
According to EducationData, 30% of all undergrad students and more than 60% of all graduate students have some kind of federal loan. And all of them qualify for student loan forgiveness — so long as they earn less than $125,000 per year.
It doesn’t matter when you graduated; if you still have unpaid federal student loans on the books, you’re eligible for the Biden Administration’s relief plan.
Note: Couples who file taxes jointly are eligible to get loan forgiveness. Couples who earn $250,000 or less and file taxes together are qualified to get up to $20,000 in loan forgiveness per individual.
How do you apply for the new student loan forgiveness plan?
You only have until Dec. 31, 2022, to apply for student loan forgiveness. But there’s also a chance that you could receive the loan forgiveness automatically; the White House says the Department of Education already has income data for up to 8 million people.
The application for student debt relief is now live on the Federal Student Aid website. Here’s how you apply:
- Fill out your name, Social Security number, birth date, phone number, and email.
- Review if one of the following is true for 2020 (Jan. 1–Dec. 31, 2020) or 2021 (Jan. 1–Dec. 31, 2021):
- You made less than the required income to file federal taxes.
- You filed as a single tax filer AND made less than $125,000.
- You were married, filed my taxes separately, AND made less than $125,000.
- You were married, filed my taxes jointly, AND made less than $250,000.
- You filed as a head of household AND made less than $250,000.
- You filed as a qualifying widow(er) AND made less than $250,000
- If you meet those qualifications, write your name and check the box to e-sign the agreement.
When will student loan forgiveness hit accounts?
In his Aug. 24 press conference about student loan forgiveness, President Biden indicated that the impact of the program would be felt around January 2023. That said, there’s been no official date for payments to hit accounts, and the executive order is expected to face some legal challenges that could delay its rollout.
Will people with low income get more loan forgiveness?
Technically, yes. The Federal Pell Grant was designed to give students from lower-income households tuition assistance — and anyone who has one of those loans is eligible for $20,000 in loan forgiveness.
How do you know if you received a Pell Grant?
You know you can get double the relief money if you have a Pell Grant, but how do you know if you received one?
Pell Grants go to students in a household with an income of less than $60,000. If your family can contribute less than about $6,500 on tuition, you’re eligible for a Pell Grant.
If you don’t know whether or not you got a Pell Grant, you can check by logging in to StudentAid.gov. They’ll ask for a Federal Student Aid ID; you can make one if you don’t have one.
Can you get loan forgiveness for private student loans?
No. If you received private student loans, those debts are not eligible for the new student loan forgiveness plan.
Since the U.S. Department of Education doesn’t distribute private loans, they’re not protected by federal loan forgiveness or payment extensions. So unfortunately, those won’t get forgiven, and payments won’t get paused. And unfortunately, there aren’t any official programs available to help forgive student loans. But there are a few options that can help.
Ask your private lender what options are available for lowering your payments. There are also plenty of companies that’ll help you refinance your private loans to help ease the pain of the monthly payments.
TIP: If you are or know a student going to college, avoid loans altogether by applying to some of these 54 often-unclaimed scholarships.
Is this different from the Public Service Loan Forgiveness program?
The Public Service Loan Forgiveness program is an entirely different way to eliminate student loan debt. More than 550,000 public service employees (like teachers and nurses), government workers, and military members working full-time can join this recently revamped program.
Basically, PSLF participants won’t need the new student loan plan because once they’ve made 10 years of on-time minimum payments, the rest of the federal debt is paid off.
To qualify for the PSLF program, you must:
- Work for U.S. federal, state, local, tribal, or not-for-profit organizations
- Work full-time for that agency or organization
- Have direct loans (or consolidate federal loans into a direct loan)
- Repay your loans under an income-driven repayment plan
- Have made 10 years of qualifying payments on the loan(s) before
See if you qualify for the PSLF program on their website.
What is the student loan payment pause?
The student loan payment pause started on March 13, 2020, in the midst of the Covid-19 pandemic and allowed U.S. citizens to stop payments on federal student loans for a limited time without any accrued interest.
Both the Trump and Biden Administrations extended the pause several times, and so far, it’s looking like student loan payments will resume on or around July 1, 2023.
The payment pause included these loans (defaulted and non-defaulted):
- Direct Loans (defaulted and non-defaulted) held by the Education Department (ED)
- Federal Family Education Loan (FFEL) Program loans held by ED
- Federal Perkins Loans held by ED
- Defaulted FFEL Program loans not regulated by ED
- Defaulted HEAL loans
Loans ineligible for the payment pause are:
- Nondefaulted FFEL Program loans not held by ED
- Federal Perkins Loans not maintained by ED (defaulted and non-defaulted)
- Nondefaulted HEAL loans
- Private student loans
Will you get refunds if you made payments during the student loan pause?
Yes, if you made any payments since March 13, 2022, during the loan pause, you’ll automatically get refunds as a part of the loan forgiveness plan. To qualify for refunds on past payments, you must:
- Apply for and receive debt relief under the Biden loan forgiveness program
- Have made voluntary payments during the payment pause
- Have not paid off your loan in full but have a balance below the maximum debt relief amount you’re eligible to receive
Basically, if you’re eligible for $10,000 in relief, had a balance of $10,500 before March 13, 2020, and made $1,000 in payments, then you would have a balance of $9,500. Then when you get your $10,000 relief, your balance would be $0, and you’d get a $500 refund from the payment you made.
Contact your loan provider to request a refund.
Can you still get a refund if you don’t qualify for student debt relief?
Yes, you can still get a refund if you aren’t getting student debt relief. However, getting a refund of student debt will increase your balance and monthly charges.
So if you made a $300 payment during the loan pause period, you’ll get a refund — but you’ll get that $300 tacked on to your debt that you’ll still have to pay back.
If you do request a refund, you have until Dec. 31, 2022, to contact your loan service provider to get it done.
Which loans aren’t covered for debt relief?
Two specific loan types might not be eligible for debt relief.
If you refinanced your loan after March 13, 2020, you aren’t eligible to get refunds for your payments.
Previously, you were eligible for debt relief if you had a federal loan held by private lenders and eventually transferred your debts to the Federal Direct program. But after several states sued the federal government — claiming that the original plan would raise state taxes for hundreds of thousands of people — the Biden Administration updated the plan with a cutoff.
Anyone who hadn’t consolidated their privately-held debt into the Federal Direct loan program before Sept. 29, 2022, wouldn’t be eligible for relief. If you filled out the Direct Consolidation Loan application and were accepted before Sept. 29, 2022, you qualify for relief. If not, then you don’t.
Can someone else request a loan payment refund on my behalf?
Only you can request or receive refunds for your loans, even if someone made a payment for you.
When will you have to start paying student loan debt again?
The Biden administration announced that after June 30, 2023, the student loan payment pause will end.
So plan your budget to make payments again on July 1, 2023.