Mass student loan forgiveness has been a hot topic for years, and it’s finally here. The Biden-Harris administration has announced up to $20,000 in federal student loan forgiveness. There are several questions about how this will roll out, and who will ultimately see student loan debt relief. While it seems straightforward, there are a significant number of factors that could affect eligibility.
To qualify, borrowers will need to have an AGI of less than $125,000 (individual or married filing separately), or $250,000 (married filing jointly or head of household). For married borrowers who file joint tax returns, while your combined AGI is reviewed, each borrower (you and your spouse) is eligible for their own forgiveness of their own debt.
Pell Grant recipients are eligible for up to $20,000 in forgiveness, and borrowers who were not Pell Grant recipients are eligible for up to $10,000. Now, to figure out if you were Pell Grant recipient.
Federal Pell Grants would have been awarded to pay for your undergraduate program. If you can’t remember, you can log into your account at StudentAid.gov with your FSA ID and password to see your grant history. Your student loan servicer will not know if you received a Pell Grant, so you need to look this one up on your own.
Pell Grant recipients
It doesn’t matter how many years ago, the amount of your Pell Grant or if you’re now enrolled in a graduate-level program. If you received a Pell Grant, you would qualify for the higher amount of forgiveness.
Now, to determine if your student loan qualifies. Private student loans are not eligible. When it comes to federal student loans, there are two classifications for this forgiveness: federally heldand non-federally held. Currently, only federally held federal student loans are eligible.
Federally held loans are direct loans, some FFEL (Federal Family Education Loan) Program and Federal Perkins Loans held by the U.S. Department of Education, defaulted FFEL loans held by a guaranty agency and defaulted federal student loans. Essentially, borrowers receiving federal student loan repayment relief since March 2020 are federally held loans — meaning, you were not required to make payments and your interest rate was set at 0 percent.
If you borrowed Direct Parent PLUS Loan(s) to pay for your child’s education, you are eligible for forgiveness of your debt.
Only loans with an outstanding balance as of June 30, 2022, will be eligible for this one-time forgiveness.
When it comes to new loans after June 30, 2022, there is no guaranty of mass student loan forgiveness in the future. Time will tell, and we will need to see what future administrations or Congress decides.
If you have non-federally held student loans, i.e., most FFEL and some Perkins loans, are you eligible for forgiveness? At this time, not exactly. The U.S. Department of Education has indicated that they are working with the commercial lenders who own these loans to expand eligibility to these borrowers.
While some borrowers may see automatic forgiveness, some borrowers will need to apply. The application is not available yet, but we hope to see it in the coming weeks. If you qualify for student loan forgiveness, the forgiven amount will not be subject to federal income tax but may be subject to state income tax.
Anyone contacting you about student loan forgiveness, especially those who are asking you to pay a fee, beware. Scammers are out there trying to take advantage of borrowers, and we are still waiting for all the details to be worked out.
Elaine Rubin has worked in higher education access and finance for more than 14 years, including seven years with the U.S. Department of Education’s office of Federal Student Aid. She is currently the director of corporate communications at Edvisors. She volunteers in the Las Vegas community to help students and families understand the importance of education.