On Wednesday, August 24, 2022, the Biden-Harris Administration and the U.S. Department of Education announced a federal student debt cancellation plan. According to the announcement, “the U.S. Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients.”
As more details are announced, the best place for information will be the Federal Student Aid website. We also recommend reading this September 7, 2022 update from the National Association of Student Financial Aid Administrators (NASFAA).
For now, here are some key things to know and do:
- There will be a final extension of the student loan repayment pause. Federal loan repayment is deferred until December 31, 2022.
- Borrowers who were dependent, enrolled students in the 2021-22 year will be eligible for relief based on parental income, rather than their own income.
- The best place to get your total federal debt and to check if you received a Pell Grant is the Federal Student Aid website. You will need your federal student aid ID (FSA ID) to login and access your information. If you did not create one or yours has expired, you will need to create a new ID.
- This debt cancellation plan applies to federal student loans held by the Department of Education, including Federal Direct (Stafford) Subsidized and Unsubsidized loans, Parent PLUS loans, Grad PLUS loans, and consolidated loans where the first disbursement was on or before June 30, 2022. Most debt held by Carleton families is federal debt and would qualify for cancellation. This NASFAA overview has more details on loan eligibility.
- The debt cancellation application is expected to be released October 2022. Sign up for “Federal Student Loan Borrower Updates” for notification of when the process officially opens. The Department of Education (ED) plans to use FAFSA and income-driven repayment application information to identify borrowers who have submitted income data for tax years 2021 or 2020. If the ED has your data for both years, it will use the year with the lower income. In these instances, an application is not required. If you do not meet either of these options, then you will utilize the application available in October 2022.
- This plan also includes a time-limited update to the Public Service Loan Forgiveness Program and offers the possibility to have all your student debt forgiven. This is relevant for borrowers who are employed by nonprofits, the military, or federal, state, Tribal, or local government. You must apply by October 31, 2022; applications are open now.
- Individuals who made payments on their loan balance during the pause on payments and interest accrual will be eligible for a refund on the amount paid if it brought their balance below the eligible cancellation amount. As explained in the Department of Education’s Frequently Asked Questions webpage, “if you’re a borrower eligible for $10,000 in relief; had a balance of $10,500 prior to March 13, 2020; and made $1,000 in payments since then — bringing your balance to $9,500 at the time of discharge — we’ll discharge your $9,500 balance, and you’ll receive a $500 refund.”
- We will update this information as more details are confirmed.