As of November 10, 2022, two federal courts have blocked the Department of Education from discharging debts under its Student Loan Cancellation program. For the time being, the Department of Education is no longer accepting cancellation applications. The Department of Education is seeking to overturn the Court decisions.
Given these legal challenges, the Department of Education has also extended the student loan repayment pause until, at the latest, June 30, 2023. It is possible that payment will restart before that time if the Department is “permitted to implement the program or the litigation is resolved” before June 2023. This means that repayment will NOT be restarting on January 1, 2023. For additional information, please visit the Department’s website here.
We will provide further updates as they are available.
What is the federal student loan cancellation program?
On August 24, 2022, President Biden and the Department of Education announced a program to "cancel" some federal student debt. The program is open to most federal student loan borrowers whose annual income for 2020 or 2021 was below $125,000 (for individuals) or $250,000 (for couples or heads of households).
For eligible borrowers who received a Pell Grant in college, the government will eliminate up to $20,000 in federal student loan debt.
For eligible borrowers who never received a Pell Grant in college, the government will eliminate up to $10,000 in federal student loan debt.
If I'm eligible, how do I apply for cancellation?
Most borrowers will need to submit a very simple form, available on the Department of Education's website: https://studentaid.gov/debt-relief/application. To fill out the form you will need your name, social security number, date of birth, and contact information. It takes less than 5 minutes to complete.
For approximately 8 million borrowers, the Department of Education will provide the relief automatically. These borrowers already gave the government 2020- or 2021-income information as part of a federal student loan application or because they enrolled in an income-driven repayment program. If you are not sure whether the Department has your income information already, you should apply.
For additional information, visit the Federal Student Aid website.
What types of loans does the program apply to?
The program applies to any federal loans held by the Department of Education. This includes all loans issued directly by the federal government. It also includes both undergraduate and graduate school loans. And it includes Parent PLUS loans (loans taken out by a parent for the education of a child or grandchild).
This program does not include private student loans.
How do I know what type of loans I have or if I received a PELL grant?
Log in to the Federal Student Aid website: Federal Student Aid, the main portal for borrowers' federal student loans. That site's "dashboard" will have information about your loans, including whether you received a PELL grant.
What if I have a federal loan that is not held by the Department of Education?
If you have privately-held federal student loans, you are only eligible for cancellation if you applied to consolidate the loans before September 29, 2022. As a general matter, consolidation occurs when the Department of Education combines all your various federal student debts into a single, new federal loan.
For more information about how to consolidate your loans visit the Student Loan Borrower Assistance website.
What if I have a federal loan that is eligible for cancellation and a federal loan that is not held by the Department of Education?
If you are in this situation, you should consider applying for cancellation on your eligible loans before taking any steps to consolidate your loans together. Borrowers who consolidate ineligible and eligible loans together after September 29, 2022, may make all of their loans ineligible for student loan cancellation.
When can I apply?
Eligible borrowers are encouraged to apply by November 15, 2022 so that they can receive the benefits of cancellation before repayment begins on January 1, 2023. Applications must be submitted no later than December 31, 2023.
The application form is available on the Department of Education's website: https://studentaid.gov/debt-relief/application.
How much of my student loan will be cancelled?
You cannot receive more money than the amount of debt that you currently have outstanding. For example, if you are eligible for $10,000 in relief, but only have $7,000 remaining on your federal student loans, then the government will forgive the full $7,000 (but you will not get anything beyond that).
Will the cancelled amount be taxable?
The IRS will not charge federal tax on the amount of cancelled debt. A provision in federal law says that any student loan forgiveness between 2021 and 2025 will not be taxed. In Ohio, the Department of Taxation also announced that this forgiveness will not be taxable. For all other states, we recommend that you consult with a tax expert in that location.
How can I avoid a scam?
Applying for the cancellation program is free. Be careful to avoid student debt relief scam companies. The federal government recommends borrowers never pay an up-front fee, avoid companies that promise quick loan forgiveness, and be careful of companies that rush you to make a decision.
Are there other resources for additional information?
- Student Borrower Protection Center: FAQS: Biden's Student Debt Cancellation Plan
- National Consumer Law Center: Student Loan Borrowers Assistance
What can I do if I still can’t pay my student loans?
You should apply for an income-driven repayment plan to help make payments more affordable. For some borrowers these payments are as low as $0 a month.
For more information, see this post on our website: What should I know about federal student loans and income-driven repayment plans?
For step-by-step directions, see this post on our website: How to enroll your federal student loans into an income-driven repayment plan.
There are also other rare circumstances where the government may discharge or forgive your debt, including if you are totally and permanently disabled. For more information visit the Student Loan Borrower Assistance website.
Updated December 5, 2022