The Biden Administration announced on August 24, 2022 its Student Debt Relief Plan for federal student loan borrowers. The relief plan will help borrowers transition back to regular payments when the student loan repayment pause ends. The plan calls for:
- $20,000 to be forgiven if a borrower attended college on Pell Grants and
- $10,000 to be forgiven if the borrower did not receive Pell Grants
To qualify:
- individuals must earn less than $125,000 and
- married couples must earn less than $250,000
An application will be available in the coming weeks to provide proof of income to the U.S. Department of Education. More details will be announced in the coming weeks. To be notified when the process opens, sign up at the Department of Education subscription page.
Payment Pause Extended
The student loan pause has been extended once again through December 31, 2022. This will be the last extension according to the Biden Administration. The extension will happen automatically. The borrower does not need to apply for an extension. Payments will resume in January 2023.
Additional Proposed Reform
To make the student loan system more manageable for borrowers the administration is proposing to create a new income-driven repayment plan that will reduce future monthly payments by:
- Capping loan repayment at 5% of a borrower’s monthly income for undergraduate loans.
- Guaranteeing 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.
- Forgiving loan balances after 10 years of payments, instead of the current 20 years, for borrowers with loan balances of $12,000 or less.
- Making sure that no borrower's loan balance grows if monthly payments are made—even when the monthly payment is $0 because of low income.
For more information, please visit the Federal Student Aid FAQ page: The Biden-Harris Administration's Student Debt Relief Plan Explained (studentaid.gov)