One-Time Student Loan Debt Relief

Graduated undergraduate students, parents with Federal Direct PLUS loans, and graduate students are eligible for student loan debt relief if your annual federal income was below $125,000 (individual or married, filing separately) or $250,000 (married, filing jointly or head of household) in 2021 or 2020.  For current undergraduate students the income limits will be based on their parent(s) 2021 or 2020 income.

$20,000 in debt relief: If you received a Pell Grant in college and meet the income threshold, you'll be eligible for up to $20,000 in debt relief.

$10,000 in debt relief: If you did not receive a Pell Grant in college and meet the income threshold, you'll be eligible for up to $10,000 in debt relief.

To view your Pell Grant history and current loan lender you can log into http://studentaid.gov/ with your FSA ID and password.

The U.S. Department of Education (ED) states the types of federal student loans with an outstanding balance as of June 30, 2022 eligible for relief are Direct Loans, which include subsidized loans, unsubsidized loans, Parent PLUS loans, Grad PLUS loans, and consolidated loans.

Consolidated loans are eligible as long as all of the underlying loans that were consolidated were first disbursed on or before June 30, 2022. If a borrower consolidated federal loans into a private non-federal loan, the consolidated private loan is not eligible for debt relief, according to ED.

Other loans included in the relief plan are Federal Family Education Loans (FFEL) held by ED or in default at a guaranty agency, and federal Perkins loans held by ED. However, relief for other FFEL and Perkins loans depends, ED states, adding that it is assessing whether to expand eligibility to borrowers with privately owned federal student loans.

Borrowers with privately held federal student loans, including FFEL, Perkins, and HEAL programs, can receive the loan cancellation by consolidating these loans into the Direct Loan program, according to ED. However, FFEL Joint Consolidation Loans — which are often referred to as spousal consolidation loans — are not eligible for consolidation into the Direct Loan program under current law.

Defaulted loans — including federally-held or commercially serviced subsidized Stafford, unsubsidized Stafford, Parent PLUS, and Grad PLUS, along with Perkins loans held by ED — are also eligible for relief. Defaulted borrowers with a remaining balance after the relief are recommended to get out of default through ED’s new “Fresh Start” initiative.

ED recommends borrowers first determine if they’re eligible for the relief by checking their annual federal income in 2021 or 2022. Borrowers then should log into their account on StudentAid.gov and with their own loan servicer to make sure their contact information is correct.

The application to receive Federal Student Loan Debt Relief is now available online and a paper version of the form will be made available at a future date.

Borrowers will have until Dec. 31, 2023, to submit their application.

 The online application is now available. 

o   When borrowers submit their application for debt relief, they’ll see a page online confirming their form was submitted and will get a confirmation email from ED. Borrowers will be notified by their loan servicer when the relief has been applied to their account, with details on how the relief was applied, ED states.

o   Support for the application is available at 1-833-932-3439.

o   After submitting the application, you can expect the student loan relief within four to six weeks.

•       However, about 8 million borrowers may be eligible to receive relief automatically and will not need to fill out an application because their income data is already available to ED. Those borrowers will receive an email and text message from ED alerting them of their status.

o   ED states it will use FAFSA and income-driven repayment application information to identify borrowers who have submitted income data for tax years 2021 or 2020. If ED has borrower data for both years, it will use the year with the lower income.

Borrowers have not been required to make payments on their federal student loans since March 2020 because of the government's pandemic-related pause. Biden has extended the pause through the end of this year, and payments will resume in January 2023.

Borrowers who have debt remaining after either $10,000 or $20,000 is wiped away could see their monthly payment amounts recalculated if they are enrolled in a standard repayment plan. Under a standard repayment plan, borrowers pay a fixed amount that ensures loans are paid off within 10 years.

Borrowers who are already enrolled in an income-driven repayment plan are not likely to see their monthly payment amounts change due to the forgiveness, because their payments are based on household income and family size.

Loan servicers will notify borrowers about their new payment amount.

The Education Department states that it will determine how relief gets applied to borrowers’ loans and provide the guidance to loan servicers, who will then process the relief.

For borrowers with multiple loans, the relief will be applied in the following order:

•       defaulted ED-held loans,
•       defaulted commercial FFEL loans,
•       non-defaulted Direct Loans and FFEL loans held by ED, and Perkins Loans held by ED.

For borrowers with multiple loans in a program type, such as multiple Direct Loans, ED will apply the relief in the following order:

•       Apply relief to loans with the highest statutory interest rate.
•       If interest rates are the same, apply to unsubsidized loans prior to subsidized loans.
•       If interest rate and subsidy status are the same, apply to the most recent loan.

·        If interest rate, subsidy status, and disbursement date are the same, apply to the loan with the lowest combined principal and interest balance.

Along with Biden's announcement about canceling some federal student loan debt, he also said he would create a new plan that would make repayment more manageable for borrowers.

There are currently several repayment plans available for federal student loan borrowers that lower monthly payments by capping them at a portion of their income.

• 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.

The Education Department will also identify borrowers who applied for Public Service Loan Forgiveness (PSLF). ED said if borrowers receive the one-time cancellation and are later found to have been eligible for PSLF forgiveness, it will adjust borrowers’ loan and apply the PSLF discharge, which may provide a refund on certain eligible payments made after the borrower has already made 120 payments.

Though the loan debt relief won’t be subject to federal income taxes, state and local tax implications will vary. ED states borrowers are eligible for debt relief regardless of whether they're in repayment, in school, or in grace, as long as they meet the income requirements and have eligible loans.

Borrowers have not been required to make payments on their federal student loans since March 13, 2020, because of the pandemic-related pause. But if borrowers did make payments, they are allowed to contact their loan servicer to request a refund.