The Student Debt Relief Plan
This plan announced on 8/24/2022 is extending the student loan repayment pause, providing loan forgiveness to student and parents, and making updates to the Public Service Loan Forgiveness (PSLF) and Income Driven Repayment (IDR) payment plans.
Extension of the Payment Pause
The student loan repayment pause has been extended one final time through Dec. 31, 2022, with payments resuming in January 2023.
The Student Debt Relief Plan provides loan forgiveness to students and parents who have federally-held undergraduate, graduate, and parent PLUS loans that were disbursed prior to July 1, 2022.
Eligibility Accordion Closed
To be eligible, the borrower’s 2020 or 2021 Adjusted Gross Income must be below $125,000 (for individuals) or $250,000 (for married couples or head of households).
Debt cancellation amounts Accordion Closed
Borrowers who received a Pell Grant in college and meet the income threshold above will be eligible for up to $20,000 in debt cancellation.
Borrowers who did NOT receive a Pell Grant in college and meet the income threshold above will be eligible for up to $10,000 in debt cancellation.
Actions to take Accordion Closed
If the U.S. Department of Education doesn’t have your income data from the 2020/2021 or 2021/2022 FAFSA or from an Income Driven Repayment (IDR) plan, you’ll need to submit an application, which the Administration will launch in October.
The application for debt cancellation must be submitted by Dec. 31, 2023.
Frequently Asked Questions Accordion Closed
How do I know if I am eligible for debt cancellation?
- To be eligible, the borrower’s 2020 or 2021 Adjusted Gross Income must be below $125,000 (for individuals) or $250,000 (for married couples or head of households).
How much debt cancellation do I qualify for?
- If you did not receive a Pell Grant in college and meet the income threshold above, you will be eligible for up to $10,000 in debt cancellation.
- If you received a Pell Grant in college and meet the income threshold above, you will be eligible for up to $20,000 in debt cancellation.
What does the “up to” in “up to $10,000” or “up to $20,000” mean?
- Your relief is capped at the amount of your outstanding debt.
- For example: If you are eligible for $20,000 in debt relief, but have a balance of $15,000 remaining, you will only receive $15,000 in relief.
What do I need to do in order to receive loan forgiveness?
- Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.
- If the U.S. Department of Education doesn’t have your income data from the 20-21 or 21-22 FAFSA, you’ll need to submit an application, which the Administration will launch in October.
- The application will be available before the pause on federal student loan repayments ends on December 31st.
- If you would like to be notified by the U.S. Department of Education when the application is open, please sign up at the Department of Education subscription page.
- Deadline for application is Dec. 31, 2023.
Can I still request a refund for payments made on my federal loans after March 13, 2020?
- Borrowers can still request refunds for any federal student loan payment made since March 13, 2020.
- Any amount paid after Aug. 24th, 2022 that brings an eligible borrower below the $10,000 or $20,000 threshold will automatically be refunded without the borrower requesting it.
- Refunded payments will increase borrower loan balances and in order to receive loan cancellation, borrowers must meet the income criteria and have eligible loans.
- Eligible borrowers who paid off all or part of their federal student loans since March 13, 2020 will still qualify for student loan forgiveness. Borrowers can request a refund by calling their loan servicer directly.
What if I am a current student?
- The relief includes current students and borrowers who have federally-held undergraduate, graduate, and Parent PLUS loans where the first disbursement was on or before June 30, 2022.
- Students who were reported as dependent on the 2021-2022 FAFSA will be eligible for relief based on parental income, rather than their own income.
Updates to the student loan system
Public Service Loan Forgiveness
Borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. This is because of time-limited changes that waive certain eligibility criteria in the PSLF program. These temporary changes expire on October 31, 2022. For more information on eligibility and requirements, go to PSLF.gov.
What is the Public Service Loan Forgiveness Program?
- The Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on your federal student loans after 120 payments working full-time for federal, state, Tribal, or local government; military; or a qualifying non-profit.
- Temporary changes, ending on Oct. 31, 2022, provide flexibility that makes it easier than ever to receive forgiveness by allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF.
- Enrollments on or after Nov. 1, 2022 will not be eligible for this treatment. We encourage borrowers to sign up today. Visit PSLF.gov to learn more and apply.
Income Driven Repayment Plans
Income Driven Repayment (IDR) plans have long existed within the U.S. Department of Education but the new rule would create a plan that will substantially reduce future monthly payments for lower and middle-income borrowers.
The new IDR plans would:
- Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
- Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
- Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.