Updated 10.25.2022: The student loan forgiveness application is now available online.
For years, Americans have listened to conversations and proposals centered around student loan debt forgiveness. And now, the wait for a resolution is finally over. That’s because on August 24th, the current administration released a relief plan poised to affect 43 million borrowers – and you may be one of them!1 Refer to the frequently asked questions below to better understand eligibility requirements and, if you qualify, how soon you can expect relief.
FAQs about student loan forgiveness
1. Who qualifies for forgiveness?
There are income requirements. Your adjusted gross income (AGI) must fall below $125,000. If you’re married, you and your spouse’s combined income must fall below $250,000. The Department of Education will refer to income data from the 2020-2021 tax seasons to determine eligibility.
The type of students loans you took out will also impact whether they’re eligible for forgiveness. Currently, private student loans do not qualify, whereas loans held by or on behalf of the Department of Education do. Visit studentaid.gov for more information about other specific types of loans, such as FEEL Program and Perkins loans.
2. How much forgiveness do I qualify for?
You’re eligible for up to $10,000 in relief if you meet the above qualifications. This amount increases up to $20,000 if you were a Pell Grant recipient. Unsure if you were? Visit studentaid.gov. In your account, select the “My Aid” option. Doing so will load a page that lists your outstanding balance and any grants you received.
Qualifying borrowers can expect relief within four to six weeks of turning in their application.
3. What if I made loan payments during the payment pause?
Federal student loan payments were paused in March 2020 in response to economic hardships due to the COVID-19 pandemic. If you made payments – or completely paid off your loans – during the pause and you meet the above eligibility requirements, you may submit a refund request. Note that the payment pause has been extended for a final time through December 31, 2022.
4. How do I apply for forgiveness?
The Department of Education has the income information of 8 million people on file to determine eligibility. For these individuals, the process is automatic. However, everyone else will need to submit an application, which is now available online. Though there is no deadline to submit a request, November 15th is the suggested date to have yours turned in. With millions of applications to get through, you don’t want to be at the back of the line!
5. Will I be taxed on cancelled student loan debt?
Nope! It is not treated as taxable income thanks to the American Rescue Plan, so there’s no need to factor it into your federal taxes. State taxes are a different story. But as of right now, Ohio, Kentucky, and Indiana are not in the group of states currently on track to tax cancelled student loan debt.
6. What if I’m a current student?
You may still be eligible for relief, but only if you meet the above eligibility requirements and you’re not listed as a dependent on your parents’ income. If you are listed as a dependent, the Department of Education will refer to their income, not yours.
7. Are there any scams I should be aware of?
Unfortunately, yes. Scammers aren’t called opportunists for nothing! The Federal Trade Commission (FTC) warns that criminals are soliciting money from unsuspecting victims so they can “jump the lines” and receive student loan forgiveness faster. Sign up for Education Department updates to always stay in the know. By educating yourself, you’ll be more likely to identify a scam.
If you’re anticipating student loan debt forgiveness, update your contact information and keep up to date on this evolving situation by visiting StudentAid.gov. With the average federal student loan debt balance per person standing at over $37,000, many students will still have a hill to climb after accepting what relief they qualify for.2 Here at General Electric Credit Union (GECU), we work hard to provide current and former students with the tools and resources they need to improve their financial life. That includes information about the subjects that directly impact you, like student loan debt forgiveness, and tools like Money Management that help you strategize debt payoff with confidence.