$20k Student Loan Forgiveness: How to Get It

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Stanley Tate

#1 Student Loan Lawyer

Updated on October 19, 2022

Biden announced up to $20k in student loan forgiveness for millions of people. Some will get it automatically. Others will need to apply. And a few won’t get it at all.

After deliberating for months over fairness and concerns about throwing gas on the inflation fire, President Joe Biden announced he would keep his campaign promise and take executive action to cancel $10 thousand in federal student debt for millions of borrowers who meet income requirements and $10 thousand more for those who received a Pell Grant to attend school.

About 95% of all federal student loan borrowers qualify for debt relief — including those still in school and others who borrowed Parent PLUS Loans. Nearly eight million people will automatically get debt relief. But everyone else will need to use an application the U.S. Department of Education released last week.

Broad-based student debt cancellation will be a one-time thing, according to Bharat Ramamurti, a deputy director of President Biden’s National Economic Council. He added that the authority to cancel debt is “conditional on an emergency [i.e., the pandemic] … and as we transition into repayment, it is not the kind of authority you can use over and over again.”

There have been several legal challenges to Biden’s student loan forgiveness plan. Republican lawmakers have also introduced legislation seeking to block the president from forgiving federal student debt.

The White House has responded to those attacks by tweaking how the cancellation was implemented. The first change was to allow borrowers to opt out of the relief. So far, over 100 people have chosen to skip out on getting their debt canceled.

The second change was to block borrowers with commercially-held Federal Family Education Loans from accessing the forgiveness opportunity. Out of nowhere, the department announced that FFEL Loan borrowers who hadn’t consolidated their loans into a Direct Consolidation Loan by Sep. 28, 2022, were no longer eligible for Biden’s plan.

Ahead, keep reading to learn more about President Biden’s $20k student loan forgiveness plan.

Who is eligible for loan forgiveness?

Almost all federal student loan borrowers, including those in default, are eligible for at least $10 thousand in debt cancellation. Most qualify automatically, but those with FFEL Loans that are commercially held and HEAL Loans are eligible only if they applied for a Direct Consolidation Loan by Sep. 28, 2022. Those who apply after may be permanently locked out of the relief opportunity. But they remain eligible for the Public Service Loan Forgiveness Program and the Income-Driven Repayment Plan Waiver. Both programs can wipe out borrowers’ entire loan balances.

On the other hand, those with private student loans aren’t eligible to have any of this relief applied to their loan balances.

Here’s who is getting student loan forgiveness

  • Single people with $125 thousand or less in adjusted gross income for 2020 or 2021 will get $10 thousand in debt cancellation.

  • Married couples who file taxes jointly and have $250 thousand or less in adjusted gross income for 2020 or 2021 will get $10 thousand in debt cancellation.

Pell Grant recipients who meet these income requirements will get an extra $10 thousand knocked off their balances.

Current students who meet the income requirements and whose federal loans—including undergraduate, graduate, and Parent PLUS loans—were fully disbursed by June 30, 2022, are also eligible for forgiveness.

Learn More: When Will Student Loan Forgiveness Show Up?

* Borrowers with Direct Joint Spousal Consolidation Loans are eligible for up to $40 thousand in relief, according to the Education Department.

How do I prove that I qualify for the $10k loan forgiveness?

If you’ve enrolled in an income-driven repayment plan during the pandemic and used your tax return to certify your income, you shouldn’t have to do anything else. Likewise, if you submitted a Federal Student Aid application in the past two years, the Education Department should already have the necessary income information. The department has already begun contacting borrowers who qualify for relief automatically.

If you haven’t done either, the department doesn’t have your income data. You’ll need to apply for the forgiveness program online. When you do, you’ll simply check a box attesting that your income was below the threshold. Most borrowers won’t need to provide a copy of their income tax return or other supporting documentation. But a handful of borrowers whom the department suspects have earned above the income requirement will need to do so.

Learn More: How to Apply for Student Loan Forgiveness

How do I prove that I qualify for $20k in loan forgiveness?

You could get $20 thousand in loan forgiveness if you received a Pell Grant to attend school—even if you only got it for one semester. Check your financial aid history and whether you got a Pell Grant at studentaid.gov. Your previous aid information would show on your account dashboard unless you went to school before 1994. But don’t worry if your account doesn’t see a Pell Grant listed, and you know you got one. The Education Department has records for federal student loan borrowers going back decades, so it should be able to confirm your award history.

You can also call the Federal Student Aid Information Center at 1-800-433-3243 and ask a representative to check your account history.

How to apply for $10k student loan forgiveness?

Deadline: Dec. 31, 2023.

The Biden administration released a simple online application that borrowers must use to apply for the $10-20 thousand loan forgiveness. To apply, you’ll need to provide your:

  • Social Security Number

  • Date of birth

  • Valid email address

  • Phone number

  • Mailing address

People who apply by the middle of November should have the relief credited to their accounts by Christmas.

You have until the end of next year, December 31, 2023, to submit the $10k student loan forgiveness form.

Apply today at https://studentaid.gov/debt-relief/application.

How will the student loan forgiveness be applied?

Borrowers, unfortunately, cannot tell the department which loans to put the forgiveness toward. Instead, it will apply the relief in the following order:

  • Defaulted loans that the Education Department owns.

  • Defaulted FFEL Loans that are commercially held.

  • Direct Loans and FFEL Loans held by the department that are in good standing.

  • Perkins Loans that are commercially held.

If you have more than one loan in a program — e.g., two or more Direct Loan Program Loans — the department will apply the relief to your loans with the highest interest rate.

If you have loans with the same interest rate, the relief will apply to your unsubsidized loans first and then to any subsidized loans you have.

If the interest rate and subsidy status are the same — i.e., you have two unsubsidized loans with the same rate — the relief will go to the newest loan.

And if the interest rate, subsidy status, and disbursement date are all the same, the relief will go to the loan with the lowest combined principal and interest balance.

Will I get a refund if I have already paid off my student loans?

People who are eligible for Biden’s plan and have paid off some or all of their debt during the payment pause are eligible for loan cancellation, according to the Education Department. But no details about how it will work have been released.

Can I get a refund if I paid during the payment pause and I’m eligible for Biden’s plan?

Yes. Contact your servicer to request a refund of any payments made after March 13, 2020. Here’s how you should handle this:

  • First, request a refund.

  • Second, wait to receive the refund before applying for the $10-20k in loan forgiveness. It can take two to three months for the money to be returned.

  • Finally, apply for cancellation.

Borrowers have inundated student loan servicers with refund requests since the White House announced plans to cancel federal student debt. According to multiple reports from Reddit users, some are already in the process of receiving a refund within the next few weeks. Others have been told by their servicer that requesting a refund isn’t required to obtain the relief and that doing so may even halt the process entirely.

What if my loans are in default?

Biden’s announcement didn’t address forgiveness for the nearly 8 million borrowers in default. But the New York Times first reported, and the Education Department recently confirmed, that all borrowers in default — including those with commercially held Federal Family Education Loans and Perkins Loans held by the government — are eligible for relief.

The department will apply the $10-20k loan forgiveness to accounts in default. Borrowers who still owe a balance after that must make long-term payment arrangements to bring their account current, or they will face collection activity when payments resume in January.

The path to getting out of default has never been easier following the department’s temporary fixes as part of Operation Fresh Start. For example, borrowers who enroll in loan rehabilitation won’t have to wait nine months before their account is returned to good standing. The department will pull their loans out of default a few weeks after the borrower returns a signed rehabilitation agreement letter. Read more about Fresh Start student loans.

Will the forgiveness be taxed?

The IRS won’t tax the forgiveness. The American Rescue Plan Act has a provision that makes any student loan debt forgiveness tax-free through Dec. 31, 2025. But that law applies only to federal income taxes. Whether you’ll owe state taxes for the forgiven debt will depend on where you live.

How will canceling my federal student loan debt affect my credit score?

Your credit score shouldn’t be dramatically impacted when the forgiveness is applied to your account. But if your credit report has few other credit accounts and not much diversity in the mix of credit you carry — auto loans, mortgage, credit cards, and so on — you could see a drop in your score. You could also lose points if your student loans are among your oldest accounts. Moving them will lower the average age of all your credit accounts.

How will the new repayment plan work?

The new IDR plan President Biden proposed would do four things:

  • Cap monthly payments on undergraduate loans to 5 percent of a borrower’s discretionary income.

  • Increase the threshold of non-discretionary income protected from repayment so that anyone earning below $15/hour won’t have to make a monthly payment.

  • Cover the monthly interest for those making payments under an income plan so their balances won’t balloon.

  • Forgive the remaining balance of borrowers after 10 years of payments for people who borrowed less than $12 thousand or less to attend college.

When will payments start back?

President Biden extended a Trump-era pause on federal student loan payments, which are now not due until after Dec. 31, 2022. Your servicer should send you a billing notice at least three weeks before your first payment is due. But you can contact the company before then to figure out specifics about your balance and repayment options, including whether you can recertify your income to get a lower payment amount under an IDR Plan. Read more about student loan recertification.

Learn More: When Will Student Loan Payments Resume?

What if I still can't afford to pay my loans?

While receiving any amount of student debt forgiveness is great, it doesn’t mean much if you still can’t afford to pay your loans when the payment pause ends. In many cases, the best option is to opt for an income-driven repayment plan. IDR Plans like IBR, REPAYE, and ICR tie your payment amount to your income and can be as low as $0. Plus, after you pay for 20 to 25 years, the remaining balance is written off by the federal government.

Options that pause student loan payments temporarily should be used sparingly. Deferments and forbearance may put payments on hold temporarily, but they add interest to your balance over time. And they typically won’t count as a qualifying payment for loan forgiveness programs like PSLF and IDR Forgiveness.

Learn More: How to Change Your Student Loan Repayment Plan

Bottom Line

For months, government officials discussed how Biden could cancel $10 thousand of debt for various groups of borrowers, including different income limitations for target relief and help close the racial wealth gap. White House advisers also tussled with concerns of debt cancellation swallowing the deficit-shrinking benefits of the Inflation Reduction Act — a bill that Democrats pushed through Congress earlier this month. Ultimately, the president took executive action to keep his campaign promise by delivering targeted forgiveness to low- to middle-income borrowers.

That’s great news for today.

Tomorrow, lawmakers will have to find a way to offset the financial burden future taxpayers will carry for this student loan relief, which could exceed a half-trillion dollars.

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