***BREAKING NEWS UPDATE! The federal student loan forgiveness application is now LIVE! You can fill it out here. Ok now here’s the article.***
When I heard that President Biden was pushing through a massive federal student loan forgiveness initiative, I knew exactly what I had to do. I dropped what I was working on and immediately grabbed my phone.
I texted Piggy, my coblogger, to let her know what truly mattered in this situation: that I was right, and she was wrong, neener neener neener.
You see, back in March of 2021, I wrote a case study dissecting an IRL friend’s financial situation. In editing my article, a disagreement surfaced between Piggy and I over the likelihood of student loan forgiveness. She considered the possibility of $10K in student loan debt cancellation so remote that she strongly pushed me to remove it from the article altogether. We settled for explaining both our stances in editorial notes, which you can still read here. (Piggy: In my defense, I’ve heard this campaign promise since I was a starry-eyed 17-year-old college applicant at a John Kerry for President event.)
But I was right. As I always am! I’m a seer, a sage, a prophetess. If I had letters tattooed across my knuckles, they would say TOLD and YASO. I am Samuel Gerard, United States Marshall, ruff ruff ruff!
Okay, okay, gloating aside… A big chunk of federal student loan debt is indeed being canceled. At long last, Cancel Culture is ASCENDENT!
I know our readers have a ton of questions about how this student loan forgiveness package works. Follow me, dear children, and I will answer all of your questions in a rapid-fire FAQ.
“Do I qualify for student loan forgiveness?”
If you have federal student loan debt, and you’re not wealthy? Probably!
To be eligible for student loan forgiveness, you must make less than $125,000 a year. The income limit doubles to $250,000 for married couples or people filing as heads of households. These folks will get up to $10,000 in student debts erased from their names.
Pell Grant recipients are eligible for even more assistance at $20,000. Though the income limits listed above still apply. If you make more money than that, you’re on your own!
Students of all standings are eligible. You may be a current or former student at an accredited higher learning institution recognized by the federal government. It’s not necessary for you to graduate or complete your education. There are no limits on the kinds of degrees or fields of study you’re pursuing, and you don’t have to meet any kind of performance threshold in school.
“Do I still qualify if my parents claim me as a dependent?”
If your parents claim you as a dependent on their taxes, it’s your PARENTS’ INCOME that counts—not yours. Your parents may claim you as a dependent if you’re a student under age 24 and they cover at least half of your expenses every year.
If you think they’ve claimed you as a dependent unfairly, start by having a conversation with your parents. There may be expenses you aren’t aware of, and you don’t want to file conflicting tax documents. It’s not clear yet if filing an amended claim would reopen your eligibility. Hopefully this detail is forthcoming.
“Which loans can be forgiven?”
Only federal student loans will be forgiven. This includes Direct Loans, Pell Grants, Parent Plus loans, Grad Plus loans, and government-backed FFELs (Federal Family Education Loans).
If you took out a loan and your parents took out Parent Plus loans, both parties are eligible for forgiveness. If your parent was still making payments on their own Pell Grants from their own education, they’ll also qualify for the higher forgiveness amount.
Loans taken out after June 30, 2022 aren’t eligible for forgiveness. So don’t rush out and get a bunch of new student loans thinking you might capitalize on the forgiveness. Sorry, they thought of that.
“What about my private loans?”
Nobody’s getting help for private student loans. Same goes for commercially owned FFEL loans and certain loans where your school acted as your lender (the now defunct Federal Perkins Loan Program).
In the case of those commercially owned FFEL loans, you may call your servicer and ask to have your loan consolidated into the Direct Loan Program to gain eligibility. The Department of Education should release more details on this in the coming weeks.
“How do I know if I have a Pell Grant?”
Pell Grants are quite common. About a third of all American college students are awarded one. They’re targeted at low- and middle-income families, so if your family isn’t rich, there’s a good chance you have one.
There’s an easy way to check if your aid package includes a Pell Grant. Go to studentaid.gov, and click “My Aid.” It’ll show you a breakdown of the types of aid you’ve received.
“Do I have to DO anything—or will it be automatic?”
Most people will need to fill out an application, but it’s not ready yet. It’s the will of the people, by the seat of our collective pants. Won’t catch me complaining! The application is rumored (but like, officially, by reputable sources) to drop in October. If you want your loans forgiven before repayments resume at the end of the year, you’d need to send in the application by mid-November. But if you’re not in a rush, you can always send it in later. They will process applications as they come in.
Confusingly, it may be automatic for some people, but not all. The Department of Education already has income data for a minority of students, like those on an income-structured repayment plan. These borrowers may see automatic adjustments, possibly a bit sooner than most others. Unless and until you see the money credited to your account, assume you need to fill out an application.
Worried you’ll forget? Subscribe to our articles if you don’t already. Seriously. We will DEFINITELY remind you to send it in!
“How long until I get my money?”
Four to six weeks, they say. It doesn’t get to you fast, but it gets you there friendly!
“How will this change my monthly payments?”
The average borrower’s student loan bills should get smaller by $150-$300 every month. I know that for a lot of people, an extra $200 a month is the difference between peril and safety. That thrills me. Obviously we have strong ideas on how to use that windfall to your best advantage:
- The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life
- Season 3, Episode 2: “I Inherited Money. Should I Pay Off Debt, Invest It, or Blow It All on a Car?”
- Investing Deathmatch: Paying off Debt vs. Investing in the Stock Market
- The Best Way To Pay off Credit Card Debt: From the Snowball To the Avalanche
“Will my student loan forgiveness be taxed?”
It might! That depends on where you live. It will not be taxed at the federal level. But you may have to pay state taxes if you life in one of these thirteen states: Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin.
The maximum possible tax liability runs from $300 to $1,100. Most are smack in the middle at around $500ish. I know, I know! Land of Ten Thousand Lakes, more like Land of Ten Thousand TAKES amirite?!
Get it? Because they’re taking from us. God I’m funny.
Some of those states may decide to implement a tax waiver later. This legislation wasn’t on the front burner until very recently, no one has had time to react, so these are default rules in those states’ taxation codes. To be safe, assume you’ll get a smaller refund and/or owe some additional money when you file taxes in the spring.
“When do I have to start making payments on my remaining balance?”
The student loan payment pause continues through the last day of this year. As we discussed here, there are a lot of strategic ways to take advantage of this subtle but incredible, life-changing gift of interest-free student loans. I advise you all to consider making payments with any little scrap you can save. It adds up quickly.
They’ve described this loan payment extension as the final one, and I believe them. I wouldn’t expect to get another. Prepare your budgets for January 2023.
“Will I get a check for the extra money?”
Hahaha! I respect the audacity of this idea, I really do! But no. The government isn’t going to hand you a few thousand extra bucks just because they have it in their budget.
There’s no such thing as “overflow” money in this situation. If you have $6,000 in student loans remaining, and the government is forgiving $10,000 in student loans, you’re not getting a check for $4,000. Sorry. It’s just gone.
“UGH BUT I LITERALLY JUST PAID THEM OFF! So I did all that for nothing?!”
Absolutely not! You made a good choice for your future self. You followed our advice and used the unprecedented forbearance period to pay down your remaining student loan debts? GREAT! That’s exactly what we—and the government—hoped you might do with it! It makes you more stable and independent. So don’t sweat it. Especially because there is recourse for you to get a refund.
The purpose of the bill is to help people recover faster from the pandemic. To that end, they’re offering a refund to anyone who paid their student loans off since the repayment pauses began way back in 2020. They haven’t announced it yet, but I’d guess that it will take the form of an application just like the forgiveness request, and will be available on a similar timeframe.
“How should I feel about this? Is it enough? Is more help coming?”
I know people have a lot of hot takes about how this wasn’t enough student loan forgiveness. I get it—and I don’t disagree. But it’s nearly impossible to get legislation through the hopelessly deadlocked legislature. At some point, I’d lost hope for any progress on this issue, despite its enduring popularity and potency. Imagine it—I would have had to admit Piggy was right!
There are a lot of legitimate and nuanced ideas about whether student loan forgiveness is the best use of money. “What’s the point when so many people still owe so much, and that debt is still distributed so unevenly, while the cost of college continues to climb, and the planet continues to slowly warm?”
I feel you. But today is a good day to embrace optimism and celebrate a very meaningful win.
The hidden benefits
There are many more hidden benefits in this initiative beyond the $10K or $20K everyone’s talking about. They include…
- Relaxation of the nobly-minded PSLF loan requirements, in which the government forgives loans in exchange for public service. The program languished for years, as we talked about here. In just ten months, it’s gone from helping a pathetic 7,000 borrowers to helping over 175,000. The fact that it’s back, working as intended, and bringing thousands of hardworking public servants into solvency is really encouraging.
- Announcement of a new income-based federal student loan repayment system. This proposes to cap monthly student loan repayments at 5% of the borrower’s income. Guys, this is huge! Gone will be the days when a recent grad making $1,800 a month will have to choose between their $700 student loan bill and putting food on the table. Under this plan, anyone making less than $15/hour wouldn’t pay federal student loans at all.
- The only thing I really miss is a clear plan for implementing price controls on higher education. College tuition has tripled in price since 1980. Personally, I’m sick of colleges and universities that function like spendy real estate companies disguised as philanthropic nonprofits. I wouldn’t mind them being forcibly restructured.
But am I happy? Yes, absolutely. This initiative will ease the tightness in the chest of 43 million young Americans. I’ll raise my glass to that anytime.
More on student loans
Clearly, we have Thoughts™ about student loans, the cost of higher education, and student loan forgiveness. Read all about ’em here:
- What We Talk About When We Talk About Student Loans
- I Paid off My Student Loans Ahead of Schedule. Here’s How.
- I Paid off My Student Loans. Now What?
- Ask the Bitches: “The Government Put Student Loans in Forbearance. Can I Stop Paying—or Is It a Trap?”
- When (And How) To Try Refinancing or Consolidating Student Loans
- Season 3, Episode 1: “I Worry Paying for My Kids’ College Will Spoil Them. Don’t Student Loans Build Character?”
- Ask the Bitches: I Want To Move Out, but I Can’t Afford It. How Bad Would It Be To Take Out Student Loans To Cover It?
- How To Pay for College Without Selling Your Soul to the Devil
24 thoughts to “The 2022 Student Loan Forgiveness FAQ You’ve Been Waiting For”
See I’m still a bit confused and worried with my loans. I applied for Public Service Loan Forgiveness and my loans were under the department of education but they JUST moved them to another servicer, Mohela. I don’t know if this screws me over or I was never eligible in the first place but I make so little money and I need this. Ugh.
You will be okay! There are a lot of different loan services the federal government uses to college student loan payments and MOHELA is one of them. You actually have a tiny bit of an advantage as those with MOHELA serviced loans can securely upload their PSLF paperwork directly to the website for review where as most others will need to mail a physical copy to the PSLF office in Chesterfield, MO.
Thank you! I was getting so worried!
I wonder how this will affect married couples. Both my husband and I had pork grants, so we each qualify for $20k forgiveness but he only has $6k left and I have $29k. Wondering if we should go ahead and consolidate them to get the most benefits or of it will even work that way.
I don’t think you can consolidate two partners loans into one set? Congratulations to him for having his wiped out, and to you for getting down to $9k! The end is in sight 🙂
Thanks Josh! You’re 100% right, we can’t consolidate them. I hadn’t looked into it since before they changed that…apparently ages ago. And that should tell you how long we’ve been paying on them. We’re super excited to be on the last leg.
Looks like NY jumped first(?) and indicated they will not tax the forgiven loan amounts as state income. Some good more good news. https://gothamist.com/news/no-ny-wont-be-taxing-the-forgiven-debt-on-your-federal-student-loans
“To be eligible for student loan forgiveness, you must make less than $125,000 a year. The income limit doubles to $250,000 for married couples or people filing as heads of households. These folks will get up to $10,000 in student debts erased from their names.”
So if a married couple makes under $250k, do they each get $10k of loan forgiveness (assuming they hit all the other check boxes) or is it $10k between the two of them?
10k each 🙂
Hey wonderful, wise bitches! I have a question about the income limit that I haven’t really been able to find online. My partner has told me that in 2020, after bonuses at work and stuff, he made just below the 125k income limit. But in 2021, after bonuses and stuff, he made above 125k. Do you know if he would still qualify? He has about 18k left and also got the pell grant so if he doesn’t, it would wipe out his remaining loans. (obviously we feel very lucky to even be in this situation at all where he might make too much money, but we live in a hcol area and 18k would really help us out haha)
Based on recent comments made by Betsy Mayotte of The Institute of Student Loan Advisors (https://freestudentloanadvice.org/), you will qualify if you made under the limit in EITHER 2020 OR 2021. That’s not been announced officially yet, though, so it may change.
One thing to remember about the income limits for federal programs is that they are (almost always) based on your Adjusted Gross Income (AGI) not your total salary + bonus from your employer. The AGI is the income number that you pay your federal income taxes on. Which means you subtract the dollars that you paid into your 401k or IRA (not Roth) or pension if you have one. You also may be able to subtract the cost of your health care premiums, student loan interest and a few other things. This means that for most people worried about being close to the income limit you’ll probably clear it just fine.
And if you have some ability to lower your AGI by INCREASING your contribution to your 401k or IRA during the last few months of the year. If you can swing a few extra thousand into your retirement savings AND make sure your qualify for student loan forgiveness?!! double bonus!
As someone who stresses about money and “WHAT’S HAPPENING AND WHEN AM I GETTING MORE OF IT,” I really appreciate this article.
One tiny thing: For a minute there you were saying “Pell Grant” when I think you meant one of the loans. Pell Grants don’t need to be repaid.
One of the categories of borrowers specifically targeted by this legislation were those who received Pell Grants (which unfortunately do not cover all of your education expenses), so they likely took out loans in addition to the grants. Those Pell Grant recipients who also took out student loans can get up to $20k forgiven!
Thanks so much for diving in to clarify, Josh!
For those who don’t know, Josh is officially the Unofficial Third Bitch. His word here is gospel.
For example, there’s the line “if your parent was still making payments on their own Pell Grants from their own education…”
I received Pell grants when I went to undergrad, but the student loans I had from undergrad have been paid off. I’m working on paying off my grad school loans now… I’m not sure if I’ll be eligible for the $10k or $20k forgiveness – does anyone know about the nuances of this? (I don’t earn anywhere near the income cap)
I want to emphasize what others have mentioned already: Pell Grants aren’t loans. They are grants given to low-income students. In fact, they originally (mostly) covered the cost of college for the average low-income student, back in the day when the sticker price for a four-year degree didn’t cost as much as a mortgage. It may be really interesting to look into the screwed-up history of how it was the *loan* program and not the *grant* program that got expanded in the mid-20th century. (Presumably that was because, you know, the poors be lazy and don’t deserve handouts.)
This is my plug for the Bitches to broadcast the PSLF changes more widely! The waiver allows includes FFEL loans, Parent Plus, and lots of other loans and payment plan types that people were told for years did not qualify for PSLF. It also counts certain periods of forbearance as qualifying towards the 120 and allows folks with both undergrad and grad loans to consolidate and use their highest payment counts. I just helped a family member get $78k in forgiveness (which is not taxed), so I’m on a mission to share the news far and wide before the waivers expire 10/31. As Edie referenced above, Betsy at TISLA has the best information, which she also shares widely on the PSLF sub-Reddit.
I’m so with you! I got mine wiped out through PSLF earlier this year (they went back and counted NINETEEN months of payments I made that were previously not counted. Don’t even get me started…) and I am on a mission. I’m a one stop shop for friends, family, etc. to provide help taking advantage of recent changes. I was a pain in the ass to feds for over a decade, routinely calling and triple checking my status and was damn sure I was getting rid of those loans as promised. Keep up the good work, friend!!!
Congratulations AJ, that is so exciting!! Yes let’s keep making noise so others learn about it too!
I qualified for Pell Grants when in undergrad but paid that amount off. Now in grad school and one can only qualify for loans in grad school financial aid. Would I only be qualified for the 10k forgiveness or would this past Pell Grant qualification help me receive the 20K forgiveness?
Massachusetts won’t be taxing the forgiven loans! https://www.masslive.com/politics/2022/08/student-loan-forgiveness-rep-steven-owens-says-massachusetts-students-will-not-pay-500-in-taxes-on-student-debt-cancellations.html
I paid a good chunk of my loans off during the pandemic (because like Piggy, I also didn’t believe this was going to happen ever), but now I am getting that refund and getting everything forgiven! One huge weight off my shoulders tbh, I hate the feeling of having debt or owing anyone anything.
Thank you to the Bitches for writing this article! I definitely needed this, my eyes were crossing trying to understand the actual govt pages on the whole student loan forgiveness stuff.
Halleluja! That’s great news! And thank you so much for your validation. Like Tinkerbell, we need it to survive!