Student Loan Forgiveness: Everything You Need to Know

Student Loan Forgiveness: Everything You Need to Know

October 06, 2022

After weeks of uncertainty, borrowers of student loans can now apply for the Biden administration’s debt relief program. Full or partial federal student loan debt cancellation of up to $20,000 is available to Federal Pell Grant recipients and up to $10,000 to non-Pell Grant recipients that qualify.

Here are some of the most common questions about this student loan forgiveness plan and some additional benefits to be extended to borrowers who still have student loans after forgiveness is processed.

Who Qualifies?

  • Individuals who had an adjusted gross income (AGI) less than $125,000 in 2021 or 2020.
  • Families that had an AGI less than $250,000 in 2021 or 2020.

** Your adjusted gross income tends to be lower than your total income. You can find your AGI on line 11 of your IRS Form 1040. Also, you are only required to meet the income criteria for either 2020 or 2021, not both. i

How Many Students Benefit From This Plan?

According to, if all borrowers claim the relief they are entitled to, the program could potentially provide relief to up to 43 million borrowers, including canceling the full remaining balance for roughly 20 million borrowers. ii

What Else Does the Plan Provide?

Along with the forgiveness of federal student loans, Biden’s plan continues to extend the payment and interest-rate pause on these loans through December 31, 2022. iii The White House’s announcement indicated that this would most likely be the last such extension offered.

Is Loan Forgiveness Taxable?

Pursuant to Section 9675 of the American Rescue Plan Act (ARPA) there is no federal income tax owed on student loans that are forgiven between 2021-2025. iv States which follow the federal treatment will likewise exclude debt forgiveness from their own state income tax bases, but keep in mind, not every states does that. v

Does Forgiveness Apply Retroactively?

Unfortunately, if you have already paid off your federal student loans, you do not receive any benefit from the $10,000 to $20,000 loan forgiveness.

Which Loans are Eligible for Forgiveness?

Eligible loans disbursed on or before June 30, 2022 include:

  • Default loans including ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, graduate PLUS; and Perkins loans held by the federal government (ED).
  • Federal Perkins Loan Program loans held by ED
  • Federal Family Education Loan (FFEL) held by ED or in those default at a guaranty agency
  • William D. Ford Federal Direct Loan Program loans

Ineligible loans

  • Private student loans (Originating from financial institutions like banks, credit unions, and online lenders) are managed by private companies, and therefore exempt from debt relief plans and proposals currently in place. vi

  • Federal Family Education loans (FFEL) and Perkins loans that are not held by the federal government. vii

If a borrower has multiple loans, relief will follow in this order:

  • Loans with highest statutory interest rate
  • Interest rates are the same, unsubsidized loans before subsidized loans
  • If interest rate and subsidy status is the same, applied to the most recent loan
  • If interest rate, subsidy status, and disbursement date are the same, applied to the loan with the lowest combined principal and interest balance.

What Do Borrowers Need to Do?

Borrowers should apply for debt relief using your own income information. If it is determined that you are a dependent student, you will receive an email with instructions for you and your parent. Until then, you do not need to do anything except submit your application by filling out a Debt Relief Application.

The application process is easy. You fill in your full name, social security number, date of birth, phone number, and email address. Within a few minutes of submitting the application, you will

receive an email from (U.S. Department of Education) with the message – Your application for one-time federal student loan debt relief has been submitted!

Your application will then be processed and contacted if further information is needed. You will be updated throughout the various steps taken to determine your eligibility.

What If I Am a Dependent Student?

If you are a recently enrolled undergraduate student, you may be classified as a dependent student if you fall under one of these categories:

  • You were enrolled as an undergraduate student between July 1, 2021, and June 20, 2022.
  • You were born after Jan. 1, 1998.
  • You were not married.

If it is determined that you are a dependent student, you are eligible for the same amount of debt relief as everyone else, but your eligibility is based on one or both of your parent’s income, not your income.

Beware of Scams

If anyone contacts you offering help to get a loan discharged, forgiven, canceled or any of kind of debt relief for a fee it is a scam. You never have to pay for help with your federal student aid.

Official emails from the Department of Education will come from:

  • or
  • You can report scam attempts to the Federal Trade Commission by calling 1-877-382-4357 or by visiting

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05339568

i Debt Relief | Application | Federal Student Aid

ii FACT SHEET: President Biden Announces Student Loan Relief for Borrowers Who Need It Most - The White House

iii Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment | U.S. Department of Education

iv FACT SHEET: President Biden Announces Student Loan Relief for Borrowers Who Need It Most - The White House

v Student Loan Debt Cancelation Tax Treatment | Tax Foundation

vi Private Student Loan Forgiveness Alternatives (

vii Biden Student Loan Forgiveness FAQs: The Details, Explained – Forbes Advisor