Details on Biden’s Student Loan Forgiveness Plan

The application process is officially under way for President Joe Biden’s student loan relief program, the most sweeping act of forgiveness yet for the millions of borrowers who have waited years for help with their education-related debt.

Currently, a court order is temporarily keeping the administration from releasing forgiveness funds, but the Department of Education continues to encourage the submission of applications, and the application review process is ongoing.

Assuming it clears the legal hurdles, the program allows for cancellations of up to $20,000 of loan debt for those who received Pell Grants to finance their education, and $10,000 for borrowers who used federal student loans. The plan could provide student loan forgiveness to more than 43 million people, according to the administration.

When Can You File for Biden’s Student Loan Forgiveness?

You can file right now, despite the current court order temporarily blocking the release of funds. The digital application went live on Monday, Oct. 17, 2022, after the Department of Education put the site through a short beta testing period. In the first week of its availability, more than 12 million people applied.

If you can’t get to it immediately, don’t worry. The application will remain open through next year, or until Dec. 31, 2023. If possible, the government suggests you apply by Nov. 15 this year, while the pause on federal student loan payments is still in place.

The pause, which has been extended several times by both the Trump administration and the Biden administration since it began on March 13, 2020, is now scheduled to end on Dec. 31, 2022. The Education Department says borrowers should be prepared to resume their payments on Jan. 1, 2023. Hence, the Nov. 15, 2022, suggestion, as processing time for the forgiveness applications is expected to be 4-6 weeks.

Some 8 million borrowers eligible for student loan cancellation could already have been notified that they will benefit from the program, even without applying. That is because the Department of Education already has their information on file, so their debt cancellations are automatic.

If you aren’t able to apply online for the student loan relief, the Education Department promises to provide a paper application.

How to Apply for Biden’s Student Loan Forgiveness

The application is available now at the Department of Education’s Federal Student Aid website. As we mentioned earlier, the department promises to provide a paper application to those who need it. The same deadline (Dec. 31, 2023) applies whether the form you use is digital or paper.

The process is easy and simple, as the application doesn’t require you to provide any documents or use any special log-in credentials. The form is available in both English and Spanish and on both desktop and mobile platforms.

You will need to have some basic information at the ready, including your social security number, date of birth, email address, and phone number. You’ll need to know your adjusted gross income and your federal tax-filing status (single, married filing separately, married filing jointly, head of household, or qualifying widow or widower) from one of the last two tax years.

Your adjusted gross income (AGI) is one of the factors that determine your eligibility for student loan forgiveness. If your AGI was less than $125,000 as an individual in 2021 or 2020, you are eligible. If you were married and filed jointly and your AGI was less than $250,000 in either of those two years, you also qualify.

The application doesn’t require you to provide proof of your income or filing status, though it asks you to affirm your eligibility using those two factors. It states that you might need to show proof of your income later in the process, if requested. If that happens, you’ll have until March 31, 2024, to provide it.

That’s it. The form consists of a very small handful of fields to fill in. It can be completed in five or 10 minutes. Reports from the White House indicate that many early applications were filed from mobile phones.

When Will Student Loans Be Canceled?

The administration expects to need between four and six weeks of processing time after an application is received. But because federal student loans come from different loan servicers, the program can’t promise a one-size-fits-all date for when loans will be canceled.

Pending the disposition of the current legal challenge, though, it could start happening automatically as soon as late October for those nearly 8 million people carrying federal student loan debt whose income information is already on file with the Department of Education.

The legal challenge that caused the delay came at the end of the first week of the application’s availability, when a court appeal from six Republican-led states temporarily succeeded in blocking the administration from fulfilling any approved debt cancellations, putting the process on hold. But Biden and Department of Education secretary Miguel Cardona remain confident the program ultimately will be allowed to move forward, and so they are urging candidates to apply now.

Here’s how the process will work:

• When you submit the application, you’ll receive an email confirmation that the review process has begun.
• It’s possible the review will result in a request for more information, such as documentation to verify your income or help in matching your loan to the government’s records.
• If you don’t hear back with any of those requests, you’ve done all you need to do.
• You’ll be notified when your application has been approved or rejected.
• If you’re approved, the plan administrators determine how your debt relief applies to your loans and provides that information to your loan servicer or servicers.
• Your loan servicer then applies your relief directly to your account and notifies you of the new status of your balance.
• If the relief you’re granted doesn’t cover the entire balance of your outstanding debt, the servicer will notify you of what your new monthly payment will be when the pause ends on Dec. 31, 2022.
• If you have more than one loan servicer, each one will notify you separately.

You also will be refunded automatically for any payments on your federal student loans you made during the March 2020-through-December 2022 payment pause that reduced your balance to below the amount of relief for which you’ve been approved.

There are a couple of steps you can take to make sure the process runs more smoothly.

• Confirm that your loan servicer has your current contact information. If you’re uncertain about which agency provided your loan, you can use the Federal Student Aid website to check it out.
• Make sure the Department of Education has your current income data. Look for the Department to offer an application designed to simplify that process soon.

How Do You Qualify for the Biden Student Loan Forgiveness?

The first step in the qualification process is to make sure your student loan came from a federal lender and whether you received a Pell Grant. Private loans aren’t eligible for forgiveness through this program.

The loan or loans you used to finance your education must have been obtained before June 30, 2022. Any loans secured after that date don’t qualify. And if you paid off your student loans before March of 2020, you won’t be eligible for relief.

Other factors that will determine your eligibility include:

• Your income. If you file your taxes as an individual, your adjusted gross income must be less than $125,000. If you file as a married couple or as a head of household, your adjusted gross income must be less than $250,000. If you are a current student and a dependent, your parents’ or legal guardians’ income will be used to establish your eligibility.
• Your degree. Most federal student loans are eligible for forgiveness as long as they were taken out in pursuit of an undergraduate, graduate or professional degree. It doesn’t matter if you didn’t finish the degree; you’re still qualified for relief.

If you are classified as a dependent student on your parents’ income tax returns, you’re still eligible for the full amount of relief. You could be classified as a dependent student for, among others, the following reasons:

• You were enrolled as an undergraduate student between July 1, 2021, and June 30, 2022.
• You were born after Jan. 1, 1998.
• You aren’t married.

However, if you are classified as a dependent student, you should use your own income when you fill out the student loan forgiveness program application. Once the government identifies you as a dependent, it will notify you with additional instructions for you and your parents.

It’s possible you can qualify for relief through the program even if you’ve defaulted on your federal student loan. Bottom line: There is no good reason not to apply.

What Type of Student Loans Are Being Forgiven?

There are four types of federal student loans that can be forgiven through the program as long as you received your loan funds on or before June 30. 2022.

The four types are:

• William D. Ford Federal Direct Loan Program loans.
• Federal Family Education Loan (FFEL) Program loans held by the Department of Education or in default at a guaranty agency.
• Federal Perkins Loan Program loans held by the Department of Education.
• Defaulted loans, including Subsidized Stafford, Unsubsidized Stafford, parent PLUS, graduate PLUS, and Perkins loans held by the Department of Education.

Consolidation loans are eligible if all the loans that were consolidated were held by the Department of Education and the funds were dispersed before June 30, 2022.

Perkins or FFEL loans that aren’t held by the Department of Education and subsequently were consolidated also qualify, but only if you applied for the consolidation before Sept. 29, 2022. That’s a change from the program’s original announcement in August. The plan then was to include those privately-held loans regardless of the consolidation date, but the administration narrowed that eligibility requirement in an effort to forestall legal challenges.

You can confirm the type of loan or loans you have by selecting “My Aid” in the dropdown menu of the StudentAid.gov website after you’ve logged in.

Will Student Loan Forgiveness Be Based on AGI?

The adjusted gross income (AGI) that appears on your tax forms from either 2020 or 2021 is the primary qualifier for relief eligibility. That should be helpful, because your AGI likely is lower than your total wages.

Your adjusted gross income is what you earned after deductions, 401(k) contributions and other adjustments are subtracted from your total wages. Using your AGI rather than your total wages should increase the chances that you’ll meet the income requirement.

Remember, you are eligible if your adjusted gross income in either 2020 or 2021 was less than $125,000 as an individual or under $250,000 as a married couple or a head of household.

Unsure what your AGI was? It’s the number that appears on line 11 of your IRS Form 1040.

How Much Is the Biden Student Loan Forgiveness Stimulus?

 The amount of debt forgiven in the student loan forgiveness program is a maximum of $10,000, unless you received a Pell Grant during your time in college. If you did, you could get up to $20,000 in loan forgiveness, provided your income during the pandemic was less than $125,000 or, if you were married and filing jointly, less than $250,000.

The amount you receive if your application is approved might not cover the entirety of your loan or loans. After all, only about 54% of borrowers of federal student loans owed less than $20,000 as of March 2022, according to a collegeboard.com study. If that’s the case, you’ll be responsible for resuming your payments on the remaining balance as of Jan. 1, 2023, when the payment pause expires. Chances are, though, your monthly payments will be lower than they were in the past, as the new balance will reflect the amount of relief you received. You’ll hear from your loan servicer about the amount of your new monthly payments.

It’s important to remember that those $10,000 and $20,000 figures are the maximum amounts available to you in the forgiveness program. If your outstanding student loan debt is less than the maximum, you’ll only get the balance of what you owe. For example, if you owe $8,500 and you are approved as an individual filer, you’ll receive $8,500 in relief – not the full $10,000 or $20,000. However, you’ll automatically receive a refund for some of your loan payments if they were made during the payment pause, which runs from March 13, 2020 through Dec. 31, 2022.

What Else Is in the Biden Student Loan Forgiveness Plan?

The most interesting points in the Biden Forgiveness Plan – outside of having $10,000 or $20,000 worth of debt canceled – are the proposals for improving access to the beleaguered Student Loan Forgiveness Program. The big news is the proposal to cut the amount of discretionary income that borrowers use to pay off loans from 10% down to 5%.

One other note worth following: The DOE says it will continue making efforts to make community college free and to double the size of Pell Grants. The 2022 federal budget included a $400 increase to the Pell Grant maximum, bringing it to $6,895 for the 2022-23 academic year.

New Income-Driven Repayment Plan

The Department of Education is proposing a new income-driven repayment plan that would cut the amount borrowers have to pay every month on undergraduate loans from 10% of discretionary income to 5%. The rule also would forgive loan balances after 10 years of payments for borrowers with original loan balances of $12,000 or less, instead of the current rule of 20 years. However, those plans haven’t been implemented yet and likely will be subject to a public-comment period. It could be another year before they become a reality.

PSLF Changes

The DOE has proposed allowing more payments to qualify for Public Service Loan Forgiveness (PSLF) including partial, lump sum, and late payments, and allowing certain kinds of deferments and forbearances – such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service – to count toward PSLF. This, too, is still in the works.

More good news: the DOE says that the temporary changes that took effect in October 2021, have resulted in $10 billion of debt relief for more than 175,000 borrowers.

Those changes allowed student borrowers to get credit for payments made on loans from the Federal Family Education Loan (FFEL) Program, Perkins Loan Program, and other federal student loans. These borrowers must apply to consolidate their loans into a Direct Consolidation Loan before the deadline of October 31 to qualify for the program under the temporary changes.

Additionally, under the temporary changes, past periods of repayment count whether or not borrowers were on a qualifying repayment plan or whether or not borrowers made payments.

Accountability for College Tuition Rates

The DOE says it is taking steps to make colleges accountable for tuition hikes and hold schools accountable for raising costs, especially when failing to deliver good outcomes to students. The agency will propose to reinstate and improve a rule to hold career programs accountable for leaving their graduates with unaffordable debt.

They also intend to publish an annual watch list of the programs with the worst debt levels in the country and request institutional improvement plans from colleges that outline how the college intends to bring down debt levels.