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The Department of Education has posted this update related to the previously announced student loan debt relief program. You can read more information on the Federal Student Aid website here.

The Student Loan Debt Relief Plan: What We Know, What You Need to Know

You’ve heard the big news from the federal government about the new three-part Student Debt Relief Plan initiative, and we know you’ve got questions. You’re not alone! As with any initiative of this size and scope, there’s a lot of details you need to be aware of. Here’s the basics of what we know now.

Student Loan Debt Forgiveness

The headline-grabbing part of the program is student loan debt forgiveness for certain eligible borrowers. What does this mean?

  • If you have existing federally held undergraduate, graduate, or Parent PLUS loans that were first issued before June 30, 2022 and your individual income is $125,000 or less ($250,000 for households) the Department of Education plans to forgive up to $10,000 of your student loan debt.
  • If you received a Pell Grant as part of your financial aid package and meet these requirements, the Department of Education plans to forgive up to $20,000 of your student loan debt.
  • If you’re a dependent student whose parents took out Parent PLUS loans on your behalf, they will be eligible for this relief under similar rules: individual income of $125,000 or less, or household income of $250,000 or less.
  • If your loan balances are less than these amounts, you will only have the remaining balance of your loans forgiven. So, for example, if your remaining balance is $7,500, this amount will be forgiven. You won’t receive an additional $2,500 on top of that.
  • You may already be automatically eligible to receive this debt relief, if the Department of Education has your income data on file (around eight million borrowers already have this information in the system).
  • If you don’t have existing income data in the system, the Department of Education plans to have a simple application available by early October. You can sign up for updates and notifications at the Department of Education.
  • The loan debt forgiveness does not apply to private loans — only federally held undergraduate, graduate, or Parent PLUS loans.

The loan debt forgiveness does not apply to first-time fall 2022 students (the student loan must have been borrowed in a prior academic year) — but there are other parts of the overall Student Debt Relief Plan which will have big, positive impacts on you and your student loans.

Student Loan Repayment Pause: Final Extension

Most federally held student loans have been in a repayment pause to help borrowers through the economic hardships associated with the COVID-19 pandemic. This repayment pause has been extended several times, and will be extended one last time until December 31, 2022. This means that repayment will resume on federally held loans beginning January 2023. You don’t need to do anything to benefit from the repayment pause: it will occur automatically. Just make sure you’re ready to begin repaying your student loans when the pause has ended.

Canceling Student Loan Debt Through Public Service Loan Forgiveness (PSLF)

Student loan borrowers who have entered the workforce and maintained at least 10 years of employment in several categories of public service organizations have been eligible for the Public Service Loan Forgiveness (PSLF) program, provided they meet certain criteria. Unlike the new student loan debt forgiveness initiative, the PSLF program cancels your entire remaining student debt if you qualify.

The federal government recently announced new, more flexible temporary eligibility rules that take into account the realities of work and repayment and a wider range of your qualifying repayments will be taken into account.

How Do I Qualify For Public Service Loan Forgiveness?

Many of you may have already met the required 120 payments to qualify for PSLF, but it’s important to note that these changes are temporary and in order to be considered under these relaxed rules, you must sign up for the program by October 31, 2022.

From November 1, the original PSLF criteria will resume. Even if you’re not sure of your eligibility, now is the time to apply. The program will help you determine if you’re qualified, or how close you are to qualifying, and help get the process started so you know how close you are to qualification.
We urge you to visit this site to learn more about this opportunity, and get your application started. Unlike the limited student loan debt forgiveness initiative, this program is already approved and in progress, but time is running out for you to apply.

Other Major Changes

In addition to these major initiatives, the federal government is proposing the establishment of a new income-driven repayment plan that would substantially reduce the burden on student loan borrowers.

This new rule will:

  • Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This halves the 10% amount under the most recent income-driven repayment plan. 
  • Raise the amount of income considered non-discretionary income, and therefore protected from repayment. This guarantees that no borrower earning under 225% of the federal poverty level — about the annual equivalent of a $15 minimum wage for a single borrower — will have to make a monthly payment. 
  • Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
  • Cover borrowers’ unpaid monthly interest. This means unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments — even when that monthly payment is $0 because their income is too low.

These are significant changes that can have major impacts on your student loan burden, now and far into the future. As with any big, complex government initiative, most of these plans are still being worked out, and we recommend you stay up to date by signing up for the Department of Education’s notifications and online newsletters. We’ll update our resources and keep you informed as we learn more.

Avoid Potential Scams

Be on the lookout for potential scams related to student loan debt forgiveness! Just as we saw happen with the student loan repayment pause, criminals will try to use public interest in this topic to scam people. Remember: there will be no fees from the government to get this debt relief, and the federal government will not call you directly to ask you questions. Anyone contacting you to offer expedited loan relief or any kind of program to accelerate the process is not an authorized representative of the federal government, and is likely trying to scam you. If you receive any communications like this from outside parties, do not engage and do not share your personal information.