Top Things You Should Know About Student Loan Forgiveness

Recently, President Biden, Vice President Harris, and the U.S. Department of Education declared a three-part strategy to help working and middle-class federal student loan borrowers shift back to regular payment plans as the student loan pandemic-related support is set to expire on December 31, 2022.

This plan includes loan forgiveness of up to $20,000 for Pell Grant recipients and $10,000 for individuals that didn’t receive a Pell Grant.

Many borrowers and families may be asking themselves, what do I have to do to claim this relief? Or am I eligible? In this video, one of our financial coaches, Allison Rosenberg explains a few key concepts as we all try to navigate this new program. There will be more details announced in the coming weeks so stay tuned.

Additional Resources:

• Press Release from The White House 
• The Federal Student Aid Information Center  

Video Transcript:

Hi everyone! A new student loan debt relief program was recently announced. I wanted to take a few minutes to walk through the key concepts.

This program is not aimed at private student loans. You can to your private loan provider to see if they are offering any type of relief. The public student loan payment pause has been extended through the end of 2022. So, your next “required” payment will be due in January 2023.

The second part of the plan involves debt relief. To be eligible for any of the direct cancellations, your income needs to fall below certain thresholds. For those who are single, or married filing separately, your 2020 or 2021 federal income needs to be less than $125,000.

For those who are married filing jointly, or head of household, your 2020 or 2021 federal income needs to be less than $250,000. If you file as a dependent, your eligibility will be based on your parent or guardian’s income.

The Department of Education should already have your 2020 and/or 2021 federal income on file. If you are unsure about that, please contact your servicer. Once your eligibility has been determined, you will want to see how much you qualify for.

Anyone who was the recipient of a Pell Grant can receive up to $20,000 in direct loan cancellation. For those individuals who did not receive a Pell Grant, you will receive up to $10,000 in direct loan cancellation.

Here are three key highlights we want to address:

• This only applies to loans taken out before June 30, 2022
• You will not be required to pay federal income tax on any relief you receive, but certain states may require state income tax
• If you have been making payments throughout the pandemic, starting March 13, 2020, even though there was a payment pause, you may be eligible for a refund. Your loan provider can offer more information on your specific case

If you believe that you will qualify for student loan debt relief, you will need to take action. An application will be ready in early October. Please visit studentaid.gov/debtrelief, where you sign up to receive a notification when the application is ready. All applications must be completed by November 15^th, 2022.

If there are any changes or updates to the program, we will be sure to let you know. We will also be proving more information on the public service loan forgiveness program so stay tuned!