Targeted student debt cancellation
Taking one of the most significant actions around student debt in a generation, the Biden-Harris Administration announced a plan to provide targeted student debt cancellation to millions of federal student loan borrowers.
Some borrowers will see one-time debt cancellation of up to $10,000 – $20,000. Your eligibility and the amount of forgiveness depends on your income and whether you received a Pell Grant in undergrad.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who received a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $20,000 in loan forgiveness.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who did not receive a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $10,000 in loan forgiveness.
The changes apply to borrowers with federally-held undergraduate, graduate, and Parent PLUS loans disbursed by June 30, 2022. All student debt forgiven between December 31, 2020 and January 1, 2026 is not considered federally taxable income, so any debt canceled under the new proposal will not affect your federal tax return. Depending on your state, debt cancellation may be subject to state income taxes.
The Department of Education will use your income from 2020 or 2021. If your income was below the limits for one or both of these years, you will be eligible for forgiveness. For those who are currently in Income-Driven Repayment plans, or recently filled out a FAFSA, the Department of Education may use the income information already on hand. For others, there is a short application.
More questions? Visit Federal Student Aid’s debt relief FAQs.
COVID payment pause
Federal student loan payments have been paused since March 13, 2020, and interest rates have been set at 0%. The Administration has extended the pause again, with payments set to resume sometime in 2023. Payments will resume 60 days after the Department is permitted to implement the program or the litigation is resolved, which will give the Supreme Court an opportunity to resolve the case during its current Term. If the program has not been implemented and the litigation has not been resolved by June 30, 2023, payments will resume 60 days after that.
As has been the case since March 2020, the pause is automatic and non-payments qualify for PSLF so long as you’re working full-time at a 501(c)(3) nonprofit or in government. Borrowers do not need to recertify their IDR plans during the COVID payment pause, and the earliest borrowers will be asked to recertify is July 2023. Therefore, there’s no need for you to take any action, unless you’re entering an IDR plan for the first time, changing the type of repayment plan you’re in, or need to reduce your monthly payment amount.
Details about the pause and next steps will continue to come from the Department of Education. As always, you should check studentaid.gov for the latest announcements.
Suspended loan payments
On March 27, 2020, Congress passed a COVID-19 relief package called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act includes relief for federal student loan borrowers, primarily in the form of suspended payments and interest accrual on federal Direct and FFEL loans held by the Department of Education.
Significantly, these months will count as qualifying payments for Public Service Loan Forgiveness so long as you’re working full-time for a PSLF-qualifying employer. Similarly, payments will count toward time-based IDR forgiveness (the 20-25 year forgiveness plans automatically built in to all income-driven repayment plans). Suspended payments will also be reported to credit agencies as regularly scheduled payments, and therefore should not affect your credit score.
The payment suspension is automatic. All borrowers of federally-held direct and FFEL student loans have been automatically placed on what the Department of Education is calling an “administrative forbearance,” which will suspend payments during this time period. Because the change are automatic, autopay will be suspended. If you have made or will make any payments after March 13, 2020 contact your loan servicer if you want a refund.
Both the Trump & Biden administrations extended this relief multiple times. Relief currently lasts from March 13, 2020 through sometime in 2023 (either 60 days after student debt cancellation is implemented or 60 days after 6/30/23, whichever comes first).
If you’d like, you can make payments during the payment pause, but you must take action. You may not be financially impacted by COVID-19, you may be trying to pay your loans off, or you may want to take advantage of the 0% interest rate to lower your loan balance. Whatever the reason, there is the option to continue making payments. To make a payment, you will either need to 1) opt out of the payment suspension (if you want to continue auto-pay), or 2) log on to your loan servicer’s website and make manual payments.
However, if you plan to pursue PSLF, make sure you do not get put on a paid-ahead status by paying more than what’s due. To do so, you should either manually select that you do not want to be put into paid ahead status or advance your due date, opt-out of the suspension, or contact your loan servicer to permanently remove paid ahead status. If you are in a paid ahead status, your payments may not count as qualifying payments for PSLF. There have been some recent updates to this policy, but if you made payments before August 2020, it is better to be cautious and ensure your loans are in the correct status.
If you’re on Income-Driven Repayment, your plan was automatically extended during the COVID payment pause. Here’s what you should do now to figure out your IDR plan details:
To check if you’re enrolled in an income-driven repayment (IDR) plan, log in to your Federal Student Aid account. Click your name at the top right, then “My Aid.” Scroll down to “Loan Breakdown,” then expand and view your loan details. Each loan should have an affiliated Repayment Plan. The plans that qualify for LRAP are Income-Based Repayment (IBR), New Income-Based Repayment (New IBR), and Pay As You Earn (PAYE). You can also find your repayment plan on your loan servicer’s website.
If you’re not currently in an income-driven plan, you should apply soon. Application processing can take up to a few months. Once approved, you’ll get an IDR approval letter that you can use to apply to LRAP.
If you’re already in an income-driven plan, you need to figure out how much you’ll be paying when the pause ends. To successfully apply for LRAP, we need to know 1) your monthly payment amount and 2) when your IDR plan starts and ends. To find the information we need:
- Check your loan servicers’ account inbox or website to see if your repayment plan details are listed there.
- If MOHELA is your servicer, log in and go to the Repayment Options → Income-Driven Plan Details page. View an example.
- If you have an old IDR letter (i.e., you know your monthly payment amount but not when your plan ends), log into studentaid.gov. In the My Aid dashboard, click View Details. On your Loans page, click View Breakdown and then the View Loans down arrow for your DEPT OF ED loans. Click View Loan Details for any one of your loans. Scroll down to the Repayment Details box and look for an IDR ANNIVERSARY DATE. View an example.
- Contact your servicer if you can’t find these details, because they are required for your LRAP application.
As always, continue to document everything related to your student loans for future use, especially if you plan on applying for PSLF. Document any communications or letters from your loan servicer about the COVID payment pause and other relief.
Other loan updates
From March 13, 2020 through the end of the pause, all federal student loans (for current students and those in repayment) will have a 0% interest rate. Your loans won’t be accruing interest during this time period. Any payments you make will go toward the principal balance of your loans, 0nce all the interest that accrued prior to March 13, 2020 is paid. This change is automatic—there is no need for you to do anything.
If your income has been affected by COVID-19 and you have private student loans or institutional loans (e.g. refinanced loans, bar study loans, Perkins loans, etc.), please reach out to your lender directly to discuss your options. Some lenders are providing forbearances, interest rate reductions, and extended payment timelines to borrowers who submit a request.
If you have an LRAP loan due back to the University, a Perkins loan held by the University of California, or a Bar Study loan, the UC System has implemented some changes to mirror the COVID payment pause as much as possible. All late fees and interest will be waived from April 15, 2020 – May 1, 2022. You can request an administrative forbearance so that no payments will be due through at least May 1, 2022. Administrative forbearances will automatically be applied to past due accounts. If you are not able to make payments, please contact Heartland ECSI to request a forbearance or deferment, or use this form.
If you have a defaulted federal student loan (federally-held Direct or FFEL loans), the Department of Education has stopped requests to withhold wages, tax refunds, and Social Security benefits, effective March 13. The DOE has also instructed private collections agencies to stop reaching out to borrowers. If you have a loan in delinquent or default status, please reach out to us for assistance.
Know that it’s always an option to reduce your income-driven monthly payment amount if your income decreases and you can no longer afford your payment. You can apply for an immediate recalculation of your plan if you hope to reduce your monthly payments once the payment pause ends.
MOHELA will credit time spent in the COVID payment pause toward PSLF so long as you were working full-time for a PSLF-qualifying employer.
Make sure to submit a new PSLF Form to certify your employment and payments annually and each time you leave a job. This will ensure you’ve gotten proper credit for all your payments or non-payments while the pause was in place.
On October 6, 2021, the Department of Education announced new improvements to the Public Service Loan Forgiveness program to restore the promise of PSLF. The temporary PSLF waiver was in place until October 31, 2022. The waiver allows borrowers to receive PSLF credit for all payments made while working full-time for a PSLF-qualifying employer, regardless of federal loan type or payment plan. This includes loan types and repayment plans that were previously not eligible for PSLF, and payments that were late or not made in the full amount due.
In October 2022, the Department of Education has issued new guidance(opens in a new tab) for how it’ll handle PSLF between the waiver expiring (10/31/22) and new regulations going into effect (7/1/23). Borrowers will be able to receive credit for all past periods of repayment status, months prior to consolidation, months spent in deferment prior to 2013, and 12+ months of consecutive forbearance and/or 36+ months of cumulative forbearance.
On November 1, 2022, the Department of Education announced(opens in a new tab) new regulations governing the Direct Loan program and PSLF that will go into effect on July 1, 2023. Review our News & Updates page for more information.
You might be eligible for stimulus or economic impact checks from state or federal governments. The amount and your eligibility depends on your tax filings. The amount you receive will not be considered taxable income, and will not be considered income for LRAP purposes. Please do not include these stimulus check as income in your LRAP applications for funding or forgiveness.
FedLoan Servicing, Granite State Management & Resources, and Navient recently announced they will not renew their contracts with the Department of Education. If your loans are managed by one of these servicers, they will be transferred to a different servicer by the end of the year.
If your servicer is FedLoan Servicing, your loans will be transferred to MOHELA. If your servicer is GSMR, your loans will be transferred to Edfinancial. And if your servicer is Navient, your loans will be transferred to Maximus / Aidvantage.
To prepare for the transition:
- Download and save everything you can from your loan servicer’s website–payment histories, billing statements, income-driven repayment plan documents, PSLF/Employer Verification Form acceptances and approvals, notices about the federal payment pause, etc.–before the transfer occurs. Keep all of those documents saved for your PSLF records. Some borrowers have had problems after previous transfers, with new loan servicers claiming some payments didn’t count toward PSLF. You’ll want to make sure you have proof of all your payments so you’re able to refute any claims like that if they arise.
- Take note of your loan balance at the time of the transfer. Once your transfer is complete, make sure the loan balance is correct. Your repayment plan should transfer over with your loans, but make sure your monthly payment amount is correct after the transfer is complete.
- Register an account with your new servicer (you can confirm your servicer on studentaid.gov) and set up autopay.
There has been in increase in student loan scams since the COVID-19 and student loan relief announcements. Be aware of scammers and know that the federal government will never call to ask for a fee to suspend your loan payments. Report any scams to the FTC or the California Department of Financial Protection and Innovation.
last updated November 22, 2022