Student Debt Relief Plan

On August 25th, 2022 President Biden announced the Student Debt Relief Plan. The plan includes forgiving federal student debt for those that make under $125,000 per year ($250,000 for couples). Students who received a Pell grant can get up to $20,000 forgiven and those who didn’t can get up to $10,000. It hasn’t been announced how and when this forgiveness, along with several other major proposed changes, will be fully rolled out to borrowers.

Scroll below the calculator to learn more about the other aspects included in the forgiveness plan and how they may impact you.

How it Works

Use the calculator below to see how much forgiveness you may be eligible for. You can use either your 2020 or 2021 tax filing status and AGI (adjusted gross income), whichever would help you qualify.

Income-Driven Repayment Plan Changes

Not only will this plan forgive student debt, it also will make it easier to pay off any remaining debt. Changes to income-driven repayment plans will include capping the percent of discretionary income the borrower must pay at 5% (as opposed to the current 10%) on undergraduate loans. It also raises the amount of income considered non-discretionary. This means a smaller percent of a smaller amount of income will be used to calculate the payments. It also makes it so that no workers earning 225% under the federal poverty level (those making around $15 an hour) will be required to make monthly payments.

Along with smaller payments, it will make forgiveness easier for those on income-driven repayment plans. For those who make their payments consistently and have a balance of $12,000 or less, their debts could now be fully forgiven after 10 years instead of 20. And if a borrower on an income-driven repayment plan makes their monthly payments (or if their monthly payment is calculated to be $0) the government will cover the interest. That means their student loan debt will not continue to grow, making it easier to pay off the owed amount.

PSLF Eligibility Changes

The plan waives some of the eligibility requirements for the Public Service Loan Forgiveness (PSLF) program. If you have worked in public service for 10 years or more (even if not consecutively), you may be eligible to have all your student debt canceled. That means borrowers who have worked for non-profits, the military, and federal, state, Tribal, or local governments may be eligible, even if they weren’t previously, but borrowers must apply by October 31, 2022. For more information, go to PSLF.gov.

Payment Pause

The pause on student loan payments has been extended a final time to December 31, 2022.

Frequently Asked Questions

Is the Student Debt Relief Plan for sure going to happen?

The best answer to this is “most likely,” but it’s not guaranteed. It’s possible that the plan could be challenged in court which could delay or prevent it from taking effect. It’s best to wait until things are a bit more set in stone before adjusting your budget for new payments or spending more money than you would’ve otherwise.

What do I have to do to get my loans forgiven?

If the Department of Education has your 2021 or 2020 income information, your eligible amount will be automatically forgiven without you having to do anything. If you suspect you’re not in that group for whatever reason, there will be an application made available before the end of the year. Subscribe to the US Department of Education for updates as they are made available.

What if I owe less than what I qualify to have forgiven?

The amount of forgiveness you qualify for is capped at your current loan balance. So, if you owe $7,000 but qualify for $10,000 of forgiveness, $7,000 will be forgiven. You will not receive an extra payment or relief on any other loans for the remaining $3,000.

What loans qualify for forgiveness?

The main target of this plan is federal undergraduate and graduate student loans. Private student loans do not qualify for forgiveness. The forgiveness does, however, extend to Parent PLUS loans. Meaning that if you or your family took out such a loan to finance a child’s education, it can also be forgiven.

When will loan payments begin again for my remaining balance?

President Biden said that this plan would include the “final” pause on student loan payments. Payments for remaining balances are scheduled to begin again in January 2023.

Do I qualify if I’m currently a student?

Yes, if the loans were taken out before July 2022 and you meet the other qualifications, your existing debt can also be forgiven.

What if I’m a dependent student?

Qualifying for forgiveness as a dependent will be based on your parents’ or guardian’s income, meaning they need to make under $125,000 individually or $250,000 as a couple.

What if I’m married and both of us have debt?

If you filed taxes jointly, your combined AGI must be under the $250,000 limit. If so, you could each qualify for the appropriate amount depending on if you received a Pell grant or not. For example: if your spouse received a Pell grant, they would qualify for $20,000 and if you did not, you would qualify for $10,000. If you filed taxes separately, your individual income must be under $125,000 in order to qualify.

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