Update: Student loan forgiveness is canceled. Check out our new article to start preparing for repayment.

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The Basics 📝

• $20,000 of debt forgiven if you received Federal Pell Grants (lower income)
• $10,000 of debt forgiven if you did not receive Federal Pell Grants.
• A final extension of the payment pause due to COVID-19 until December 31st, 2022.

Eligibility Requirements:

✅ If single, you earned less than $125,000 a year in 2021 or 2020.

✅ If married, you and your partner combined earned less than $250,000 a year in 2021 or 2020.

✅ Your student loans are federal, not private.

✅ Commercially-held FFEL (Federal Family Education Loans) will not be eligible for student loan forgiveness, even if consolidated into a Direct loan, unless you submitted an application to consolidate prior to September 29, 2022.

That’s Awkward… I Already Paid 🤨

• You CAN receive a refund on any payments you made on your loan between March 13th, 2020 and December 31st, 2022.
• To request a refund, contact your student loan provider. If you don’t know who it is, log into studentaid.gov)

More Perks 🙌

You might be eligible to have ALL of your student loans forgiven if you made 120+ monthly payments on a direct loan and work for one of the following:

• Non-profit
• Military
• Government
• State Government
• Federal Government
• Local Government
• Tribal Government

note: these changes expire on October 31st, 2022. To check your eligibility go to PLSF.gov and use the tool

Taxes 🤢

Most states have decided that student loan forgiveness is not treated as taxable income, but several states are planning to tax the forgiven amount.

• Will Tax:
• Indiana, Mississippi, North Carolina
• Undecided:
• Arkansas, Minnesota, West Virgina, Wisconsin
• How much you will pay will depend on how much debt is forgiven and your state’s tax rate. Tax rates in these states range from 3-5%, so we estimate the tax bill could range from $300-$1000 if you have $10,000 or more of debt forgiven.

Changes to Existing Repayment Plans 💰

In addition to student loan forgiveness, the package also proposes changes to income-driven plans. Here are the changes:

• Cut the amount that borrowers pay monthly in half from 10% to 5% of discretionary income
• Raise the amount considered non-discretionary
• Forgive balances after 10 years of payments (from 20 years) if you borrowed less than $12,000.

So… When Can I Apply?

The government has not yet released the application yet, but says it is planned to be released in early October (any day now ⏰).

• Make sure that you have your most recent contact information updated in your studentaid.gov account and to your loan servicer.

While Biden’s plan is a step in the right direction, we still believe that more has to be done. This education relief is a great direction towards making higher education more affordable, but this is not the solution.

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