09/13/2022

What You Need to Know About the Federal Loan Forgiveness Announcement

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On August 24, 2022, the Biden Administration announced an extension of the federal student loan payment and interest pause through December 31, 2022, as well as plans to cancel a portion of federal student loan debt.

What You Need to Know About the Federal Loan Forgiveness Announcement

Payments and interest accrual on most federal student loans have been on hold since early 2020 resulting from the pandemic. Since then, the pause has been extended multiple times. On August 24, 2022, the Biden Administration announced an extension of the federal student loan payment and interest pause through December 31, 2022, as well as plans to cancel a portion of federal student loan debt.

 

How does this impact federal student loans?

  • The payment and interest pause on federal student loans will have a final extension through December 31, 2022, at which point payments and interest will resume.
  • Federal student loan borrowers who earn less than $125,000 per year, or households earning less than $250,000, are eligible for debt cancellation up to $20,000 for Pell Grant recipients and up to $10,000 for non-Pell Grant recipients.

 

Where do I find my Pell grant information?

Log in to your Federal Student Aid account and view your FSA Dashboard to see a breakdown of your federal student loans and grants.

 

What steps do I need to take to receive the federal student loan cancellation?

According to studentaid.gov, nearly eight million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.  If the U.S. Department of Education doesn’t have your income data, the Administration will launch a simple application in the coming weeks.

 

Will my private student loans be canceled?

Unfortunately, this only impacts federal student loans and does not impact any of your private student loans.

 

If I previously refinanced my federal student loans into a private student loan, will I still get $10,000 in cancellation?

The forgiveness is tied to existing federal student loans. If you opted to refinance your federal student loans into a private student loan, the new refinance loan is not eligible for this cancellation.

 

What if I have less than $10,000 in federal student loans?

Only your outstanding federal loans will be forgiven so you may be able to take advantage of the entire forgiveness amount.

 

Will I have to pay taxes on the loan forgiveness?

This debt relief will not be treated as taxable income for federal income tax purposes but may be taxable depending on your state.  Consult with a tax professional in your state for more information.

 

Where can I get detailed information about these measures?

Visit https://studentaid.gov/debt-relief-announcement/ for more information.