On August 24 2022, President Biden announced that he would cancel $10,000 of federal student loan debt for all borrowers who make less than $125,000 (for individuals) or less than $250,000 (for married couples or heads of households) and $20,000 for borrowers who received a Pell grant when in college and fall under those income thresholds. This is incredible news for the 43 million people who are eligible for relief. The Department of Education estimates that 20 million borrowers may have their loans completely canceled.
But that’s not all: The Department announced that it is extending the payment pause (originally scheduled to end on August 31, 2022) until December 31, 2022, and that it will release its proposed regulations for a more generous income-driven repayment plan in coming days so that monthly payments may be lower for people who still owe federal student loans after cancellation. This is a huge relief for many borrowers whose financial resources have already been stretched due to the pandemic and rising inflation.
We will update this blog post with more information about the implementation of these policies as we know more. But here are some answers we have right now.
How can I tell if my loans are eligible for cancellation?
Borrowers with any form of Department of Education-held loan (including Parent PLUS loans and graduate school loans)—the same loans subject to the COVID-19 payment pause—are included within this announcement. A full list of which loans are currently eligible is available from the Department of Education here.
Note that only existing loans taken out before July 1, 2022 are eligible for cancellation. New loans taken out on or after July 1, 2022 to attend school will not be eligible for cancellation.
Private student loans are not eligible for cancellation.
To see what type of loans you have, and how much you owe, log into your account on StudentAid.gov and click the “view details” link at the top right of the My Aid box.
How can I tell if I received a Pell grant, and now could receive $20,000 in cancellation?
Log in to your account on StudentAid.gov, and click the “view details” link at the top right of the My Aid box. At the top of the screen, there is a button that says “My Grants.” If you borrowed a Pell grant, it would appear there, and you will be eligible for $20,000 in cancellation.
How can I tell if I am eligible for cancellation based on my income?
To be eligible for cancellation, your income must have been below $125,000 (for individuals) or $250,000 (for married couples or heads of household).
The Department of Education has said that borrowers will be eligible if their income was below the income cap in either of the last two years, and will consider, for example, your AGI from your 2020 or 2021 tax returns. AGI (“adjusted gross income”) is your total income minus certain deductions (you can find that on your tax return if you filed taxes).
If you are currently a dependent student, your eligibility to have your student loans cancelled will be based on your parents’ income. Approximately 6 million borrowers may be eligible for relief automatically because their family filled out the FAFSA application for student aid in the past two years and provided their relevant income on that application.
What do I need to do to make sure I get the loan cancellation?
Most borrowers will need to submit an application to the Department to receive loan cancellation, but the application is not yet available. It is expected to be available in early October. Department officials have stated that the cancellation will be automatic for eligible borrowers who have submitted income information over the last two years on a FAFSA form or when certifying their income for an income-driven repayment plan.
While the application for cancellation is not yet available, we recommend taking the following steps today:
- Log in to studentaid.gov and make sure that your contact information is correct and up to date. This will help to ensure that you receive updates about cancellation—and about your loans generally—from the Department of Education. Make sure that your mailing address, phone number, and email addresses listed on your studentaid.gov account are correct.
Note: studentaid.gov has recently been crashing as large numbers of borrowers have been trying to log into their account. If you cannot get in, do not give up! Try again at a later time.
- Make sure that your student loan servicer has your current contact information. Your servicer may also send out important information about how to access this cancellation. You should make sure that the contact information it has for you is correct. Servicer call centers are currently overwhelmed with questions about cancellation, so if you can, update your contact information online at your servicer’s website. For more information about how to find out who your servicer is and how to contact them, see here.
- Sign up for official federal student loan announcements. The Department of Education has said that it will email people who sign up for federal student loan borrower announcements when the application is available. You can sign up for these announcements here: https://www.ed.gov/subscriptions.
If I apply for cancellation, can I also apply for other forms of loan relief, like Public Service Loan Forgiveness (PSLF) or Borrower Defense?
Yes! You can apply for multiple forms of relief, and eligible borrowers may be able to have more than $10,000 or $20,000 in debt cancelled through other cancellation programs.
For example, if you worked in a public interest job and have spent more than 10 years in repayment, you may be eligible for complete cancellation under PSLF (and the current, temporary waiver which expands eligibility for relief through October 31, 2022). For more information on the temporary PSLF waiver, click here. To apply for PSLF cancellation, click here.
Additionally, if you enrolled or took out loans because you were lied to or misled by your school, you can also apply for “Borrower Defense” to fully cancel student loans you took out to attend that school, and potentially receive a refund for amounts already paid. For more information on borrower defense cancellation and how to apply, click here.
I made payments during the payment pause. If I am now eligible for cancellation, can I get that money back?
Yes—you can call your servicer to request a refund of any payments made after March 13, 2020. You should request a refund, and make sure it goes through (it may take 6-12 weeks) before applying for student loan cancellation. Additionally, you may be eligible for an automatic refund without having to request it when you apply for cancellation: Automatic refunds are available if you apply for cancellation and your payments during the pause brought your outstanding balance below the $10,000 or $20,000 that you are eligible to have cancelled.
This is great, but I will still have a balance outstanding if $10,000 or $20,000 is cancelled—will my monthly payments change after cancellation?
If you still have a remaining balance on your loan after cancellation, the Department plans to reamortize the loan based on the new smaller balance, which may result in lower monthly payments. In addition, the Department has announced that it is proposing a new, more generous income-driven repayment plan that would allow many borrowers to cut their income-based payments in half. But that new plan is not yet final—the terms may change and borrowers may not be able to enroll for months.. We will keep you updated.
We’d love to hear from you! How will cancellation affect you and your family? Share your story here.
