Biden-Harris Student Debt Relief Program

Sep 12, 2022

On August 24, 2022, President Biden and the U. S. Department of Education announced a plan designed to help working and middle-class students with loan debt. The main provisions of this announcement are a final extension of the pause to student loan repayments through December 31, 2022 and offers up to $20,000 of loan forgiveness for qualifying individuals.

Eligibility Requirements & Loan Forgiveness Amounts

There are two tests to determine if part of an individual’s loan is eligible for forgiveness. The first test looks at an individual’s annual income. For taxpayers filing single status, if their annual income is below $125,000, they will be eligible for forgiveness.  For married, filing joint taxpayers, or heads of households, annual income would need to be below $250,000 to be eligible for forgiveness. The guidance has specified that “annual income” is defined as Adjusted Gross Income.

If the income test is met by the borrower(s), the forgiveness amount is determined by whether the individual received Pell Grants.  Pell Grant recipients are eligible for up to $20,000 of debt relief, while those who did not receive Pell Grants are eligible for up to $10,000 of debt relief.  Please note these amounts are the maximums for both types of eligible individuals; if the outstanding loan amount is below the maximum, the individual will only receive forgiveness up to their outstanding amount, not the maximum allowable. For example, if an eligible individual did not receive Pell Grants and only has $5,000 in outstanding student debt, their forgiveness amount would be $5,000, not the full $10,000 available.

How to Apply for Forgiveness

The U.S. Department of Education will have oversight of the loan forgiveness process. According to their website, a forgiveness application will be available in October 2022.  Eligible individuals are encouraged to monitor their website and complete the application once it is available. Also, borrowers are highly encouraged to complete their applications by November 15, 2022, in order to receive relief before required monthly payments resume in January 2023.  According to released guidance, eligible individuals who complete the application can expect confirmation of loan forgiveness within 4-6 weeks. The deadline to complete an application is December 31, 2023.

Refunds Available for Payments made during Pandemic Period

In conjunction with this announcement from the Biden Administration, the Department of Education has also issued guidance regarding borrowers who continued to make payments on their student loans after March 13, 2020. Borrowers eligible for the forgiveness outlined above who continued to pay down their outstanding loans during the COVID-19 relief period may request refunds to fully benefit from the loan forgiveness provisions. Borrowers must contact the organization servicing their loans to request a refund.  The request for a refund should be done before applying to have the loan forgiven.  For example, assume an eligible individual paid $8,000 after March 13, 2020, and has an outstanding balance of $1,000 remaining. Further, assume this individual did not receive Pell Grants. A refund of the $8,000 paid can be obtained from their loan servicing organization, which would move their outstanding loan balance back to the pre-pandemic level of $9,000. From here, the individual could complete an application for forgiveness and have the $9,000 balance forgiven.

For more information or to discuss how you may be eligible for this program, please contact Matt McKinney at 828-322-2070.