The Student Loan Forgiveness Income Limit

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Stanley Tate

#1 Student Loan Lawyer

Updated on September 23, 2022

Biden’s student loan forgiveness plan is limited to those making less than $125,000 per year or $250,000 for married couples filing jointly or heads of household.

The White House recently announced a plan to wipe out significant amounts of federal student loan debt for millions of Americans. Those who earned less than $125 thousand per year during the pandemic would have $10 thousand in debt erased, and Pell Grant recipients would get $20 thousand in debt relief. Married couples who filed taxes jointly or as the head of household qualify if their income was $250 thousand or below.

Those income limits are only for President Joe Biden’s debt cancellation plan.

Related: $10,000 Student Loan Forgiveness

The US Department of Education doesn’t put income caps on the Income-Driven Repayment Plan Forgiveness and Public Service Loan Forgiveness Programs. Both IDR Forgiveness and PSLF will wipe out eligible borrowers’ debts regardless of how much they earn or owe. And thanks to the American Rescue Plan, the IRS won’t treat any student loan cancellation that happens before 2026 as taxable income.

Keep reading to learn more about student loan forgiveness income limits.

Eligibility for student loan forgiveness is based on income for 2020 or 2021

When President Biden announced his plan to bypass Congress and cancel millions of borrowers’ debts, he limited relief to those earning less than $125,000 per year. It wasn’t immediately clear what income information the U.S. Department of Education would look at to determine federal student loan borrowers’ eligibility for relief. That news came days later.

The department will look at borrowers’ adjusted gross income in 2020 or 2021 to determine their eligibility for Biden’s student loan relief plan.

Here’s how that works.

Let’s imagine that the AGI on your federal income tax return was less than $125 thousand in 2020, but it was over that amount in 2021. In that case, you would qualify for cancellation. But if your AGI dwas over in both years, you wouldn’t be eligible to have any money knocked off your loan balance.

Related: How to Apply for Student Loan Forgiveness 2022

Where to find your AGI

If you’ve already filed a tax return for 2020 or 2021, you can find your AGI on line 11.

If you still need to file for either of those years and your annual income was close to the forgiveness cap, speak with your CPA or tax professional to see what opportunities you have to lower your AGI. For example, eligible couples under 50 who made deductible IRA deposits can have their AGI lowered by $12 thousand.

The Biden administration is planning to release the forgiveness application in October. Borrowers who submit proof of their income before the middle of November should see the cancellation applied to their balances before the end of the year.

Learn More: When Will Student Loan Forgiveness Start?

Other forgiveness opportunities

In addition to the mass debt forgiveness, borrowers may be able to take advantage of two other forgiveness opportunities implemented by the Biden administration during the student loan payment pause.

PSLF Waiver

For a limited time, people who’ve worked full-time for the government or a nonprofit organization anytime after Oct. 1, 2007, can get additional qualifying credit towards PSLF for payments that wouldn’t usually be counted for the program. As of August, 175 thousand borrowers have received $9.6 billion in forgiveness under the Limited PSLF Waiver. The deadline to apply for the temporary waiver is Oct. 31, 2022.

Parent PLUS Loans and private student loans aren’t eligible for the PSLF Waiver.

IDR Waiver

The federal government writes off student loan debt after borrowers make 20+ years of monthly payments under one of its income-driven repayment plans. A recent study discovered that many borrowers didn’t qualify for that program because their loan servicers steered them into forbearances instead of an income-based repayment plan.

To rectify that, the Education Department plans to use a one-time waiver and account adjustment to give borrowers retroactive credit towards 20+ year repayment forgiveness.

Many people will see the updated payment count under the IDR Waiver applied to their account on the Federal Student Aid website, studentaid.gov, before the end of the year. But others who have older commercially-held Federal Family Education Loans must consolidate into a Direct Consolidation Loan before they’re eligible for this opportunity.

Bottom Line

The income limit for student loan forgiveness is $125 thousand per year, so if you made less than that in 2020 or 201, you qualify for some relief.

If you’re not sure whether you qualify or if you need help creating a plan to tackle your student debt, let’s talk. I’ve helped thousands of borrowers better understand their options so they can rest comfortably knowing they have a plan to deal with their loans.

UP NEXT: Navient Student Loan Forgiveness

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