Graduation cap sitting on a calculator

What you need to know about the student loan forgiveness program

October 21, 2022
Chris JacksonBy Chris Jackson
V.P. of Retail Banking

UPDATE: Judge temporarily blocks student loan forgiveness

A federal appeals court has temporarily blocked President Biden's student loan forgiveness plan as of Friday, Oct. 21, stopping any debt from being erased while the legal challenge works its way through the courts. 

However, the Biden administration is still encouraging people to apply for the program, which could cancel up to $20,000 in college debt per borrower. The online application is still live at StudentAid.gov. 

The 8th U.S. Circuit Court of Appeals' emergency stay does not prevent people from applying to the program. It does not stop the federal government from reviewing applications. It does, however, prevent the government from discharging any debt, while the court considers the case.

Six states (Iowa, Nebraska, Kansas, Missouri, Arkansas and South Carolina) have filed a lawsuit against the program, saying the Biden administration does not have the legal authority to broadly cancel student loan debt.

That didn't stop the education department from last week launching its online application at StudentAid.Gov, where it says more than 22 million people have already applied for the one-time college debt cancellation.

It is unknown when the court will make its decision. Subscribe to our newsletter to stay updated on the latest details.


There has been a lot of talk recently about the student loan forgiveness program recently announced by President Biden.

You may have heard about $10,000 or even $20,000 in student loans being forgiven. Perhaps you read something about income requirements to qualify. Maybe you even saw the whole program could still be cancelled!

To clear up confusion and give you a better picture the facts surrounding student loan forgiveness, we’ll explain more about the proposed federal program, its qualifications, and how it could impact you.

Will student loans be forgiven?

On Aug. 24, 2022, the Biden Administration announced a one-time Student Loan Debt Relief cancellation of up to $20,000 in federal student loans for millions of Americans. But not everyone with student loans qualifies for this forgiveness program, and it still faces an array of legal challenges that could freeze the plan before any cancellations get handed out.

In other words, nothing is official yet. However, though legal challenges are pending, you can still apply for forgiveness just in case the plan moves forward.

Do I qualify for student loan forgiveness?

First things first, the student loan forgiveness program only applies to federal student loans.

Private student loans from a financial institution like a bank, or a loan funded through the school, do not qualify for this loan forgiveness program.

If you are unsure whether your student loans are federal or private, you can check the Department of Education’s “Who is my loan servicer?” website at studentaid.gov.

There are four types of Federal Direct loans:

  •  Direct Subsidized Loan
  •  Direct Unsubsidized Loan
  •  Direct PLUS Loans (for parents; or graduate or professional students)
  •  Direct Consolidation Loans

On Sept. 29, 2022, the Biden administration said borrowers will not qualify who have older federal student loans now held by private lenders. These include Federal Family Education Loans (FFEL) or Perkins Loans, which up until Sept. 29, borrowers were told could be consolidated into a Federal Direct loan to qualify. Not anymore. 

Any borrower who consolidated their FFEL or Perkins loans before Sept. 29 will still qualify and be “grandfathered” in; others appear to be out of luck.

Meanwhile, if you have one of the four federal student loans listed above, you may qualify for loan forgiveness — as long as you also meet the income requirements listed below.

Loan forgiveness income requirements:

Here is how the Department of Education outlines eligibility for student loan cancellation:

  • “To be eligible, your annual income must be below $125,000 (for individuals) or $250,000 (for married couples or heads of households).
  • Up to $20,000 debt cancelled: If you received a Pell Grant in college and meet the income threshold.
  • Up to $10,000 debt cancelled: If you did not receive a Pell Grant in college but still meet the income threshold.

If you have additional questions, you can view the FAQs on the Student Debt Relief Plan Explained page on the Department of Ed’s website.

How to apply for student loan forgiveness

Though legal challenges are pending, you can still apply for Federal Student Loan Debt Relief using the online application at StudentAid.gov. The entire form should take around five minutes to complete.

After the form is submitted, the Education Department says it should take four to six weeks to process. This means that, barring any legal injunctions, anyone who applies before mid-November would expect to get their debt cancelled before Jan. 1 — when all payments on federal student loans are scheduled to restart (they've been paused since the pandemic).

 

The Department of Education also says nearly 8 million people will “automatically” receive forgiveness, because their income data is already on file with the government. That leaves millions of other qualifiers, so if you have a federal student loan and meet the income requirements, you are still encouraged to apply.

Watch out for scams

If you’ve heard about the new student loan forgiveness program, you can bet that scammers have too. Know the signs of a student loan forgiveness scam, and remember this — no government or financial agency will contact you out of the blue and ask for your personal information. If you get an email, text, phone call or mail offer that asks for up-front fees, claims to instantly wipe out debt, or doesn’t come directly from a college, bank or government agency — it’s probably a scam.

Don’t forget about another forgiveness program:

In addition to the one-time debt cancellation we've just talked about, anyone who works 10 years for a non-profit, the military, or the government could be eligible to have all of their student loans forgiven through a different program — the Public Service Loan Forgiveness (PSLF) program.

This is because of limited-time changes that were made to the program that expanded eligibility. However, those changes will expire on Oct. 31, 2022. For more information, visit PSLF.gov.

Federal student loan payments are still paused for everyone.

At the same time as announcing the new student loan forgiveness, Biden also extended the existing student loan repayment pause through Dec. 31, 2022. No one has been required to make federal student loan payments since the start of the COVID-19 pandemic, and this freeze will continue until Jan. 1, 2023.

What matters most:

While there are still details to be announced, and possible legal challenges to the Student Debt Relief program, it’s pretty clear who will qualify for federal student loan forgiveness if the program survives.

And all is not lost for private student loan borrowers, either. Your financial institution may have options and programs to help with your debt, so set up a time to talk with an expert on how to best manage your student loans.

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About the Author

Chris Jackson

Chris Jackson is the Vice President of Retail Services, responsible for management oversight of Security National Bank's retail division in Sioux City. He has more than a decade of financial experience as a personal banker and commercial lending officer. Chris holds an MBA from Wayne State (Neb.) College and his undergraduate degree from Briar Cliff University.