Student Loan | October 25, 2022 | Lisa Litant
What you'll learn
As the Department of Education (DOE) rolls out details and applications for the Federal Student Loan Debt Relief program, here’s how borrowers can apply for federal student loan forgiveness, here’s what you need to know about the plan:
If your loans are eligible, you can apply at the official Department of Education site.
1. Who qualifies for federal student loan forgiveness?
a. If you borrowed money to pay for college, you probably have a federal student loan. Roughly 93% of the $1.7 trillion in student loans today are federal. The remaining 7% of student loans are private student loans. They’re issued by banks like Sallie Mae, credit unions, and state agencies, and are often taken out after customers get federal loans. Private student loans are not eligible for the federal student debt forgiveness plan.
b. Federal student loan borrowers who earn under $125,000—or under $250,000 if they’re married and file taxes jointly or if they’re the head of a household—may qualify for $10,000 in federal student loan forgiveness. Your eligibility is based on your adjusted gross income from 2020 or 2021. Note: If you’re a dependent student, your eligibility is based on your parents’ income, not yours.
c. If you used federal Pell Grants to help pay for higher education and meet these income figures, you’re eligible to have another $10,000 (for a total of $20,000) in federal student loans forgiven.
Note: Pell Grants are need-based financial aid that don’t have to be paid back. To see if you previously received a Pell Grant, check your financial aid history by logging into the DOE website.
2. Is Sallie Mae forgiving its private student loans?
No, the forgiveness program is for federal loans only. Private student loans like Sallie Mae loans, will not be forgiven through the program.
3. Which federal student loans are eligible?
a. Federal student loans made by the government, like Direct Subsidized Loans or Direct Unsubsidized Loans, are eligible.
b. Federal Parent PLUS and Grad PLUS Loans are also eligible if borrowers meet the same income criteria. Federal student loans that are delinquent or in default may be eligible for forgiveness if borrowers meet the same income criteria.
c. Some Federal Family Education Loans (FFEL)—see #3A below for detailst.
3A. What are FFEL loans and are they eligible?
FFEL loans were originally made by private lenders who issued and administered federally guaranteed loans. That program was discontinued in 2010, and today the vast majority of loans—93%—are made directly by the Department of Education. When it comes to FFEL loan eligibility for forgiveness, it depends. They may be eligible for forgiveness if they
a. Were paused during the federal loan payment relief program and are held by the Department of Education
b. Were consolidated before September 29, 2022
If you consolidated privately held FFEL loans into Direct Loans after that date, they’re not eligible.
There are still ongoing discussions about other ways students with FFEL loans and Perkins loans not held by the Department of Education may be able to take part in the program, or some future program.
Contact your servicer to confirm whether your loans are eligible and what you’ll need to do. If you don’t know who services your loans, go here to find out.
4. OK…my loans are eligible. Now what?
a. Apply at the official Department of Education site.
b. You can sign up for updates from the DOE at https://www.ed.gov/subscriptions.
c. Go to your federal loan servicer’s website and log in to your account. Make sure your contact info is up to date—that’ll make sure you get all their communications, including what’s going on with your loan forgiveness.
d. Can’t remember who your federal student loan servicer is? Visit studentaid.gov’s “Who’s my student loan servicer?” page. You can also log in and get your servicer information from your account.
5. Are my federal loans eligible even if I didn’t get my degree?
Yes, since you still have to repay the loans, they qualify for the program as long as they’re eligible under the general guidelines explained above.
6. I’ve already paid off my federal loan; can I get reimbursed?
No, the cancellation program isn’t retroactive. If you finished paying off your eligible federal student loan prior to March 13, 2020 (when the federal loan payment pause started), you won’t get a refund. If you made payments from March 13, 2020 on, however, you may be eligible for the amount of the payments you made during that period. (If you don’t remember when you made payments, log in to your servicer account and check out your payment history.) You may have to request the refund, so check with your servicer.
7. How about loans I took out this year or ones I’m taking out next year?
For now, only federal student loans made before June 30, 2022, are eligible. Again, you’ll have to meet the income requirements.
8. Will I have to pay taxes on any of this?
Federal student loan forgiveness shouldn’t be considered as taxable income for federal taxes. It may be different for state taxes, so check with your state for more information.