Important Details on Student Loan Relief Program | Updates from our Financial Advisors
With applications recently becoming available to the public, we decided it would be a good time to discuss what you need to know about the Federal Student Loan Debt Relief program. Through this program, borrowers are eligible to earn up to $20,000 in loan forgiveness. In this article, we will cover who qualifies, which loans are eligible, tax implications, key dates, and how to apply.
Information contained in this article was largely acquired from studentaid.gov and was last updated October 18,2022.
Dates and information contained in this article are subject to change.
Who is eligible?
Pell vs. non-Pell: Loan forgiveness of up to $10,000 is available to non-Pell Grant recipients and up to $20,000 for Pell Grant recipients (this includes recipients who only received one Pell Grant). 1
Income Cap: Individual borrowers who made less than $125,000 in 2020 or 2021 ($250,000 for families) are eligible for relief.1
Loan Dates: The debt relief applies only to loan balances you had before June 30, 2022. Any new loans disbursed on or after July 1, 2022, aren’t eligible for debt relief.1
Eligible Loans: Only Federal student loans are able to be forgiven. Loans held through a private lender are ineligible for this program. Defaulted loans are eligible. William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans held by ED or in default at a guaranty agency, and Federal Perkins Loan Program loans held by ED.1
No Surplus: The amount of student loan forgiveness available depends on how much you still owe. If you owe less than you are eligible to receive, you will be relieved the entirety of the remaining balance but will not be reimbursed the remainder. For example, if you only owe $7,000 in federal loans but qualify for $10,000 of relief, you will not be receiving the surplus of $3,000. Exception: Payments submitted since the Covid-19 payment freeze may be eligible for reimbursement.2
Will the debt relief be taxed?
Federal: One-time student loan debt relief won’t be taxed at the federal level.
State: Some states may be taxing this debt relief as income tax. Check with your state of residence for the latest information. Student loan forgiveness will not be taxed in Michigan.2
- June 30, 2022 - No loans issued after this date are eligible for relief
- August 24, 2022 - US President Joe Biden announces student loan relief
- October 17, 2022 - Application becomes available to public
- October 23, 2022 - Earliest date federal government will start relieving debt
- November 15, 2022 - Recommended final date to submit application to receive relief before monthly payments recommence
- January 1, 2023 - Monthly payments begin again after 3 year moratorium
- December 31, 2023 - Deadline to apply for student loan relief
- March 31, 2024 - Deadline to provide income information
How to Apply for Student Loan Forgiveness
The application was designed to quick and simple. Completing the application should take about 5 minutes. Users will not be asked to provide documentation during the process. It is available on computer, mobile and tablet. Once information is submitted, users will receive a confirmation email. Loan service providers will contact users if more information is required and when relief has been processed.1
To apply, visit: https://studentaid.gov/debt-relief/application
What information will be required on the student loan relief application?
According to the form previewed by the Department of Education on Tuesday, the application for student loan debt forgiveness has two sections: one for borrowers' personal information and another for a sworn statement that the borrower is eligible for debt relief. The application requires the following personal information from borrowers: Name, Social Security number, Date of birth, Phone number & Email address. 4
Be Vigilant!: It is expected that many scammers will try to take advantage of borrowers applying for relief. Remember to practice caution and sense if someone contacts you about your student loans.