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All You Need to Know About Biden Student Loan Forgiveness

Update as of Nov 28, 2022: The Courts issued orders to immediately block the federal student debt relief program. The program is on hold and no longer accepting applications. Meanwhile, the Biden Administration seeks to overturn the order.
Federal student loan forbearance has been extended until 60 days after June 30, 2023, or 60 days after the legal challenges surrounding loan forgiveness are resolved, whichever date comes first. As soon as updates are available, they will be posted on the Federal Student Aid website.

During his 2020 election campaign, Biden expressed his support for implementing student loan forgiveness and reform. In August 2022, he announced a comprehensive plan to address these issues, including up to $20,000 of federal loan forgiveness for Pell Grant recipients and $10,000 for borrowers who currently earn a qualifying income. The application for forgiveness went live in mid-October, and will stay open until December 31, 2023.

In this article, we’ll go over all you should know about Biden’s 2022 student loan forgiveness and reform plan. We’ll also guide you through what you should know as you apply for forgiveness. Let’s get into it!

Who qualifies for Biden’s student loan forgiveness plan?

To qualify for Biden’s forgiveness plan, you’ll have to be a federal borrower with outstanding debt who earned an adjusted gross income below $125,000 (or $250,000 for married couples or heads of a household). If you meet these requirements, your debt will be reduced by $10,000. What’s more, if you qualified for a Pell Grant over the course of your education, your debt will be reduced by an additional $10,000, for a total of $20,000.

Keep in mind that some types of federal loans do not qualify for Biden’s student loan forgiveness plan. If you hold FFEL Loans, Perkins Loans, or Health Education Assistance Loans, you will not be able to get this debt forgiven through Biden’s forgiveness program. However, if you hold them in addition to qualifying debt, you can get that qualifying debt forgiven.

Will I need to apply to the program to have my loans forgiven?

You do have to apply to the program, though the application is very simple and requires no supporting documents. You can apply now through December 31, 2023 at the Student Aid application page. In order to maximize the chances of completing your forgiveness before the student loan pause ends on December 31, 2022, it is a good idea to apply as soon as possible.

What do I need to fill out the Biden student loan forgiveness application?

The Biden student loan forgiveness plan has been blocked for the time being by the courts, and so they are not currently accepting applications. If you have not yet applied, make sure to keep your eye on the news. If Biden is successful in his appeal, the applications will reopen and you may be eligible for forgiveness. The description below gives you an idea of what the application will look like if it does reopen.

The Biden student loan forgiveness application is remarkably simple. You don’t need to upload any proof of income, of loans, or any other supporting documents. All you’ll need to enter is:

• Full name
• Date of birth
• Social security number
• Email
• Phone number

In addition to the above, you’ll need to check a box testifying that your adjusted gross income in either 2020 or 2021 was below $125,000 for single filers, or $250,000 for joint filers. It is important to be entirely sure of this, as submission of the application for those who earned above this level could be prosecuted as perjury. For a guide on where to find your AGI on your tax returns, you can consult this tool from TurboTax.

When will Biden’s student loan forgiveness come into effect?

Biden’s student loan forgiveness has been blocked by the courts, and it is unsure whether it will come into effect at all. If Biden does turn out to be successful in its implementation, it will likely be months before it comes into effect.

Will Biden’s student loan forgiveness apply to future borrowers?

Assuming that Biden’s plan gets past its current legal blocks, there is no evidence to suggest that this plan will benefit any future borrowers. Students should not take on loans now with the expectation of having them forgiven as a result of this policy.

Do I qualify for forgiveness if I didn’t graduate?

Biden’s loan forgiveness program is currently blocked by the courts and it is unclear whether it will be implemented in the future. However, if he is successful in his legal appeals, your graduation status will have no bearing on whether you qualify for the loan forgiveness program. So, as long as you meet the program’s other requirements, you will qualify for forgiveness even if you did not complete your degree program.

What if I made payments during the payment pause?

Assuming that Biden’s student loan forgiveness plan successfully appeals the court block, if your total outstanding balance is below the amount that you are eligible to have forgiven, and you made payments over the payment pause, the loan servicer will automatically refund these payments, up to the amount you are eligible to have forgiven.

You do not need to go through any additional steps or reach out to your loan servicer; all of this will be done automatically for you.

Do Parent PLUS loans qualify for Biden’s loan forgiveness?

Assuming that Biden’s loan forgiveness plan succeeds in spite of the current legal challenges, this policy will apply not only to loans taken out directly by students, but also to Parent PLUS loans taken out by their parents or guardians. The White House has not yet specified whether the income requirements for these loans would be based on the student’s income or that of their parents.

Will Biden’s student loan forgiveness apply to private loans?

This announcement from Biden will not apply to any private loans. Even if you took out federal loans and then refinanced them into private loans, you will unfortunately not be eligible for Biden’s student loan forgiveness program.

Will this forgiveness be taxed?

Assuming the forgiveness overcomes its current legal challenges, no borrowers will have to pay any federal tax on the forgiven loans. That being said, state taxes will most likely vary on a state-by-state basis. Make sure to stay informed on the status of your state’s taxation when and if the forgiveness takes place. States such as Indiana, Arkansas, Mississippi, and Wisconsin have already voiced intents to tax forgiveness as income.

This means that you should try to save up some money in order to pay off this additional tax burden when you file your taxes next year. However, keep in mind – even if you do not have the funds to pay these taxes when they are due, you will still save money overall by taking out a loan for them rather than foregoing this loan forgiveness.

What happens if I owe less than the amount they are forgiving?

If your current balance is lower than the amount that the government is forgiving, your balance will be cleared. You will not be paid any additional funds on top of that.

When will monthly payments resume?

The date at which monthly payments will resume depends on when the legal challenges surrounding Biden’s loan forgiveness plan resolves. Payments will either resume 60 days after the outcome of Biden’s forgiveness plan is announced, or 60 days after June 30th, 2023. As of December 2022, whichever of the previously mentioned dates arrives first will be when loan payments resume.

How will this forgiveness adjust my monthly payment when repayment resumes?

If your current repayment plan is based on the principal balance, your monthly payments will be adjusted according to the forgiveness. However, if your current repayment plan is income-driven, it will most likely remain the same. Borrowers who are worried about affording payments once repayment resumes should look into income-driven repayments, a program which Biden has modified to be more accommodatable to borrowers.

Biden has yet to announce any specific plan for how monthly payments will be affected by the forgiveness, but we can expect to learn this in the coming weeks.

How will this change impact borrowers pursuing PSLF?

If you are pursuing Public Service Loan Forgiveness, this forgiveness will not interfere. The two will occur independently of one another. If you are seeking partial forgiveness, this $10,000-$20,000 will be applied on top of it.

Do I still qualify for forgiveness if my loans were in default before the payment freeze?

Yes, you do! Due to a set of new rules implemented in April 2022, many of the penalties for having loans in default were lifted. You can find out more about this change on the FSA factsheet.

How do I check whether I received a Pell Grant?

Some borrowers have spent a good many years out of school and may not remember exactly how they funded their education. Luckily, the federal government keeps a record of this information on the FSA website. If you don’t remember your account information, you should be able to retrieve it via email or phone number. If you don’t have either of these, you can get in touch directly with the FSA through their contact page.

Even if you can’t access your account, don’t panic – as long as you received a Pell Grant, they have the records for it, and you will not be rendered ineligible for your forgiveness as a result of not having your college payment statements.

How can I be sure I have received forgiveness?

Once you have submitted your application, you may be left wondering when you will actually finalize the process. While you most likely will not need to complete any more steps, you should not consider the process over-and-done-with until you receive word from the Department of Education that your application has cleared. Once you can log into your loan servicing account and see your adjusted loan balance, you can safely assume you received your forgiveness.

We recommend that you only make financial decisions hinging on your forgiveness after you have logged into your account and seen your adjusted balance. Especially given the legal challenges surrounding Biden’s plan, it is a good idea to pause any financial decisions until you see the change in your balance.

How can I stay informed?

When you fill out the forgiveness application, you will enter your email and phone number. The Department of Education will be in touch with you through these avenues regarding the status of your application, including whether they need any additional information from you. You can also sign up for additional email updates from the Department of Education.

Changes in Income Driven Repayment Plans

In addition to outlining a plan for student loan forgiveness, Biden outlined plans to make a more forgiving income-driven repayment plan, or IDR. This new plan would cut the percentage of discretionary income required by borrowers in half, from ten percent to five percent. For more about income-driven repayment plans, check out our articles on IDRs and on PAYE vs. REPAYE.

Also see: Best student loan repayment plans

Next steps

So, now that Biden has made his big announcement, what should your next steps be? Well, the answer is less exciting than you might think. The best course of action after this announcement is to wait and see what happens. Remember that this announcement has not been implemented yet, and a variety of roadblocks could arise to prevent it from occurring. You should not make any financial decisions until you can login to your loan servicer’s account page and see your balance is zero.

Students who are considering taking on loans in the future should not operate under the assumption that they will be forgiven. By all indications, this is a one-time occurrence that will not benefit future borrowers. Biden’s new IDR policy may offer more options for repaying loans in the future, but there is no reason to think they will be forgiven.

Biden’s previous actions on education financing

Public Service Loan Forgiveness Reform

Public Service Loan Forgiveness is a federal program that began in 2007. The program encourages graduates to pursue a career in public service. Under PSLF, if a borrower with federal loans works for a qualifying employer and makes 10 years of student loan payments–120 total–they will have their remaining loan balance forgiven. 

However, the program has been plagued with many technical issues since its start; it has many technical requirements regarding loan type, repayment plan, and employment. As a matter of fact, the program’s acceptance rate between 2007 – 2017 was found to be 1%. In 2018, the TEPSLF was introduced to remedy these issues. In October 2021, Biden introduced several expansions to the TEPSLF, improving accessibility for many applicants.

How do these changes affect borrowers?

The TEPSLF expands PSLF requirements by allowing payments from all federal loan programs or repayment plans to count toward the 120 payments needed for forgiveness. As long as the borrower worked full-time for a qualifying employer, they will receive credit for all federal student loan payments they made. So, many payments which were previously deemed ineligible are now eligible for the program.

What loan types gained eligibility?

Previously, only payments on Direct Loans and Direct Consolidation Loans could count toward the 120 qualifying payments for forgiveness. Payments made on loans from the Federal Family Education Loan (FFEL) program and the Federal Perkins Loan program were not eligible. 

Now, FFEL payments are eligible, and any loans that gained eligibility by consolidation now offer retroactive eligibility to payments made before the consolidation took place. This change will affect payments retroactive to October 1, 2007. The Department of Education estimates that the average borrower could receive 23 additional qualifying payments.

Summary of Biden’s changes

• Payments made on FFEL and Perkins loans now retroactively count towards PSLF if you consolidate them
• All payment plans now count towards PSLF, including Graduated and Extended repayment plans, and Standard or fixed repayment plans on terms longer than 10 years
• Time spent on military deferment now counts towards PSLF, even if the borrower made no payments during this time.
• Many borrowers have consolidated their loans in order to gain eligibility for the program. Now, all payments made before their consolidation also qualify as eligible payments. 
• Rejected PSLF payments are now eligible for review and audit to be adjusted for the new rules

Source: U.S. Department of Education

Get it while it’s hot

For the time being, these expansions to the program are only temporary, and any borrower who wants to take advantage of them will have to do so before October 31, 2022. It is possible that the Department of Education will roll out a more comprehensive and long-term solution before then, but these rules are only applicable until that date.

Other changes

In addition to the above changes, ED is also simplifying the definition of a qualifying payment. Many federal student loan borrowers missed out on PSLF credit for small mistakes. This could include making a payment that was off by a few cents or late by a few days. The temporary expansion simplifies the strict requirements for a qualifying payment.

ED will automatically update payment counts for borrowers who experienced this issue, as long as they had certified employment for PSLF. Borrowers who had not yet applied for PSLF at the time of the payments can benefit from these temporary simplifications as long as they apply by October 31, 2022.

How to take advantage of new PSLF policies

First, check the types of federal loans you have to determine if you may be eligible for additional PSLF payments. This can be done by logging in to your Federal Student Aid account and viewing your aid summary. Then, if you haven’t already, fill out the PSLF form to certify your employment for any timeframe you wish to receive additional payments for. And remember, do this before October 31, 2022 in order to ensure that you’ll benefit from Biden’s executive action!

Additional targeted forgiveness

In total, even before his August 2022 announcement, Biden had forgiven more student debt than any other president, at a total of over $17 billion. Much of this has come in the form of targeted forgiveness for special cases. Here is a brief summary of the debts he has forgiven so far, and an idea of what this might mean for the future.

Fraudulent institutions

A large portion of these funds have gone to alumni of fraudulent for-profit universities, such as DeVry. For students who paid tuition to attend schools that misled their students about the value of their degree and the quality of their education, these loans can be difficult to pay back. That’s why Biden has focused on forgiving these loans. 

If you believe that you have been defrauded by your school, make sure to apply for a Borrower Defense Loan Discharge through the federal government. This way, you’ll be able to take advantage of Biden’s aggressive policy in wiping fraudulent debts.

Permanently disabled students

The Biden administration has also discharged the debts of graduates with a total and permanent disability, as well as veterans with a severe disability. These borrowers have had their slate wiped entirely clean, so there is no need to apply for these programs. 

Implications for the future

Biden’s interest in these issues implies that targeted loan cancellation will continue to focus on in his presidency. Situations that render borrowers unable to utilize their degree in order to pay back their loans can be hard to get out of, and it appears that one of Biden’s priorities is to help these people settle their debts. If your situation is similar to any of those described, keep your ear to the ground for any policy changes that could forgive your debt.

Frequently asked questions

Are student loans forgiven after 10 years?

Student loans are not automatically forgiven after 10 years. The Public Service Loan Forgiveness Program allows some borrowers to cancel their loans after 10 years of payments, but they have to work in public service jobs for the entire time and fit a very strict set of rules.

So, it is very rare for borrowers to have their loans forgiven after 10 years, and those who do abide to a very strict set of guidelines in order to do so.

Should I make student loan payments during the loan freeze?

At this point, it is probably not a good idea to make payments during the loan freeze. If you are saving up money to put towards your loans, you are better off putting it into a savings account or marking it off on your budget as savings. Once the freeze ends, if Biden’s forgiveness leaves you with an outstanding balance, you can withdraw your funds and pay them in one lump sum.