President Joe Biden announced on Aug. 24 an income-based student debt relief program that forgives up to $20,000 in student loan debt. He also extended the CARES Act student loan forbearance through Jan. 1, 2023.
The U.S. Department of Education will forgive up to $20,000 in outstanding student debt for borrowers who received Pell Grants and up to $10,000 in student debt for those who did not receive Pell Grants. Loan forgiveness will not be treated as taxable income.
Individuals who earn less than $125,000 and couples who earn up to $250,000, in years 2020 and 2021 only, qualify for student debt relief. The U.S. Department of Education has income information on file for about 8 million borrowers who may qualify to have their college debts canceled automatically. Other borrowers will have to apply using a new, simplified application that is in development.
Students currently enrolled in college who have student loans and parents with Parent PLUS loans are eligible to apply for student debt forgiveness.
Borrowers with outstanding undergraduate loans can apply to cap their student loan payments at 5 percent of their monthly income.
The Department of Education’s website should be ready to accept applications for student debt relief in December 2022.
The pause on direct student loan payments, interest accrual and collection activity on direct student loans in default will remain in place through Jan. 1, 2023, when payments will resume. The administration indicated this would be the final payment pause extension.
Members with questions about the extension and the student loan forgiveness program are encouraged to contact the DC 37 MELS Screening and Intake office at 212-815-1111 to speak with an attorney.