Tax Refund

If you have questions about student loan forgiveness, you’re not alone — especially after recent court rulings blocking loan cancellation efforts. The Federal Student Aid office is not accepting new loan forgiveness applications at this time, but we’ve provided some common FAQs below for those who still have questions. If the program begins accepting applications again in the future, we will update this page accordingly.

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In August 2022, President Biden, Vice President Harris, and the U.S. Department of Education announced a plan to forgive up to $20,000 in student loans. If you have student loan debt, you probably have many questions about how this process works and what it means for you, so let’s get you the answers you’re looking for.

Why is student loan forgiveness on hold and can I still apply?

***Update: At the end of October 2022, a court order temporarily blocked student loan relief. At the time, the Federal Student Aid office still encouraged borrowers to apply for loan forgiveness if they are eligible. Since then, however, a new court order was issued this past week, and as of Nov. 10, 2022, the student loan debt relief program has been blocked. The Federal Student Aid office is not accepting new applications at this time, but if you have already applied, they will hold your application.

For more information and more frequent updates on this matter, head to the Federal Student Aid office’s website.

How much debt is being forgiven?

Biden’s student loan forgiveness plan allows student loan borrowers to receive up to $10,000 in debt relief. Students who received federal Pell Grants while enrolled in school are eligible to receive up to $20,000 in relief.

The amount of relief you qualify to receive is capped at the amount of your existing student debt.

As an example, let’s say you qualify for up to $10,000 in loan forgiveness, but you only have $8,000 of student debt left to pay. In this case, you’d receive $8,000 in debt relief. You would not receive the excess $2,000 as a refund.

What loans qualify for Biden’s forgiveness plan?

All government-held federal student loans have the potential to qualify for student loan relief. This includes both undergraduate and graduate federal loans, as well as Parent PLUS loans. Loans in default can also qualify for forgiveness.

If you’re unsure if your student loan qualifies for relief, it’s best to contact your loan servicer.

What are the requirements to receive student debt relief?

To qualify for debt relief, your yearly income (or your parents’ yearly income, if you are a dependent) must be less than $125,000 for single filers or less than $250,000 in total household income for those married filing jointly or head of household.

Only loans distributed by June 30, 2022, are eligible for forgiveness. Any loans distributed after this date will not qualify for relief.

Will I automatically qualify for student loan forgiveness if I meet the income requirements?

If you have eligible federal student loans and meet the income requirements, you should qualify to receive debt relief. Most borrowers will not receive relief automatically. You will likely need to apply for relief, so the government can approve your application and start processing your discharged debt.

How can I apply for student loan debt relief?

***Update: Due to a court ruling, student loan forgiveness is currently blocked and the Federal Student Aid office is not accepting new applications at this time. If you already applied, they will hold your application.

The application for federal student loan debt relief is now open, and anyone who is eligible can now fill out the short online application.

Borrowers are advised to apply before Nov. 15 to receive relief before the payment pause expires on Dec. 31, 2022.

Beware of scams! If you are contacted by a company claiming to help you get loan forgiveness for a fee, it is likely a scam. You will not need to pay anything to have your student loans discharged or canceled. Never reveal your personal information to a company making these claims.

Will I be taxed on my discharged student loan debt?

You will not be taxed on forgiven student loans at the federal level, thanks to a provision in the American Rescue Plan last year. However, certain states may decide to tax student loan relief at the state level.

Can I claim relief retroactively and get back payments I already made?

Possibly, depending on when you made the payments.

In most cases, you are not able to receive a refund for student loan payments made in the past to increase your forgiveness amount.

However, there is one exception to this rule. During the COVID-19 pandemic, a payment freeze went into effect. If you made any voluntary student loan payments during the freeze — since March 13, 2020 — you can get those payments refunded.

If you made voluntary payments during the pause that would have qualified for relief, you’ll automatically get those payments refunded to you if you apply for student loan forgiveness.

For instance, let’s say you qualify for $20,000 of debt relief. Before the payment pause, you had $22,000 in student debt, but after making $4,000 in extra payments during the payment freeze, your balance is now $18,000. You apply for student loan relief and you’re approved to receive $20,000 in loan forgiveness.

Because your balance is now only $18,000 and you qualify to receive $20,000 in relief, you also qualify to have $2,000 of your student loan payments refunded, since you voluntarily made extra payments during the forbearance period.

Will my monthly payments change after some of my student loans are forgiven?

Yes, your loan servicer will recalculate your monthly payment amount after a portion of your loans are forgiven.

Is the payment pause still in effect?

The payment pause has been extended through June 30, 2023. Payments are currently set to resume in July 2023.

I started college in the fall of 2022. Do I qualify for loan forgiveness?

Only loans first distributed by June 30, 2022, are eligible for forgiveness. If you received loan payments after this date, they do not currently qualify for relief.

Do I qualify for student loan cancellation if I’m still in school?

Yes, you can qualify for student loan forgiveness if you are still in school and meet all the other requirements.

However, if your parents still claim you as a dependent on their tax return, your eligibility for loan forgiveness would depend on your parents’ income rather than your own. If your parents are divorced, your loan forgiveness eligibility would be based on the income of whichever parent filed the FAFSA (Free Application for Federal Student Aid).

Main takeaways

While debt discharge is currently paused pending legal rulings, the Federal Student Aid office is holding the applications of students and parents who meet the income requirements for student loan forgiveness. At this time, they are not accepting new applications.

The Federal Student Aid Office has a helpful page of information regarding other changes that are included in Biden’s Student Debt Relief Program, including changes to PSLF and additional modifications to make income-based repayment plans more manageable for current and future borrowers.

This article is for informational purposes only and not legal or financial advice.

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