All The Student Loan Forgiveness Deets ✅

Student Loans

January 24, 2025

Early last month, Biden’s administration announced the long awaited student loan forgiveness plan. Of course, there are lots of questions around eligibility and what this plan might mean for you. Let’s answer them!

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

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 Virginia, 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.