Everything You Need to Know About President Biden’s Loan Forgiveness Plan (in chronological order)
After months of speculation, President Biden finally announced his student loan forgiveness plan:
- Cancellation is available to all federal student loan borrowers whose Adjusted Gross Income (AGI) is under $125k, or under $250k for married couples or heads of households.
- If you received a Pell Grant in college, you’ll be eligible for up to $20,000 in debt cancellation. If not, you’re eligible for up to $10k.
- Income qualifications for Dependent students will be based on their parents’ incomes.
- Independent students (which includes all medical students) will be based on their own income.
- Applies to federal student loan balances outstanding as of June 30th, 2022.
Six Republican-led states sued President Biden in an effort to block his forgiveness plans. The underlying plaintiff in the lawsuit is MOHELA, who services commercially-held FFEL loans and argues it would lose interest and servicing revenue if forgiveness were to happen. In response the White House quickly and quietly amended the qualifications to exclude commercially-held FFEL loans, impacting an estimated 770k borrowers.
U.S. District Judge Henry Autrey heard arguments from both sides of the case but did not make an immediate ruling.
The Dept of Education formally launched a simple forgiveness application, attesting that meet the eligibility requirements and requiring no supporting documentation. The application can be found HERE, only takes one or two minutes to complete, and is mobile friendly.
After being dismissed by Judge Autrey the day prior, a Federal appeals court blocked President Biden’s forgiveness plan. This is not a ruling against the forgiveness, but rather a temporary injunction which stops any forgiveness activity while the case is properly vetted in the court.
Our recommendation is that everyone who believes they are eligible go ahead and complete the application as soon as possible. As we are in uncharted territory, we don’t have an expectation as to how this might play out.
For PSLF Candidates in Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin:
Loan cancellation may be taxable in your state. Because Public Service Loan Forgiveness is not taxable at the Federal or state level due to an IRS provision, opting out of President Biden’s forgiveness plan may reduce your tax liability without increasing your payments.