When student loan payments were paused in March 2020, many people wondered what would ultimately become of their debt. Now, almost three years later, the White House has announced a plan of to forgive many student loans.
Now that things are getting into motion, people who attended college (and their loved ones!) suddenly have very different loan situations than they had when payments paused in 2020.
Here are a few common questions and answers about student loan forgiveness:
Who qualifies for forgiveness?
- earned less than $125,000 (or a couple/head of household who earned less than $250,000) in annual income during either 2020 or 2021
- has a federal loan
can qualify for up to $10,000 in student loan forgiveness.
This forgiveness appears to be a “cliff.” For example, if you earned $125,500 in 2020 and 2021, you wouldn’t qualify for any forgiveness. But if you earned $124,500 during just one of those years, you could receive the full amount!
Plus, if you qualified for a Pell Grant as a student, you can receive an additional $10,000 in student loan forgiveness.
What about parents with PLUS Loans?
Those who took out parental loans can also have those forgiven. The same income requirements apply.
If I kept paying off my loan during the freeze, can I still get forgiveness?
Yes! If you paid a portion of (or all of) your student loan during the pandemic and your income qualifies, you can potentially receive a refund.
I think I qualify for loan forgiveness. How do I get it?
Many borrowers will be automatically forgiven because the U.S. Department of Education has their information on hand. The rest will have to apply. You can sign up to receive updates on the application process. The deadline to apply is December 31, 2022.
If I or a loved one qualifies, will we have to pay taxes on the repayment?
Federally, this loan forgiveness is not considered income, but a few states are considering taxing student loan forgiveness as income (sorry, North Carolina!).
If I have less than $10,000 in student debt, do I get the extra?
No. If you owe less than $10,000, then forgiveness only applies to what you owe.
It’s important to note that the Department of Education has not yet released precise details about how student loan refunds will work with Biden’s new forgiveness opportunity. If you have more questions about how the student debt forgiveness situation applies to you, talk to your advisor!
Learn more about college planning
- College Hacks for Parents and Grandparents
- Podcast: Ways to pay for college
- College planning video
- Paying for college