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Student Loan Forgiveness Updates and FAQs: Who Qualifies and How To Apply

Mariah Ackary
By
Mariah Ackary
Mariah Ackary

Mariah Ackary

Contributor

Mariah is a freelance contributor to Newsweek’s personal finance team. After putting herself through college, Mariah became interested in using personal finance to achieve financial freedom—whether that means paying down debt or using credit card points to take a dream vacation. She’s written and edited hundreds of articles about the topic and feels passionately about helping other millennial and Gen Z women live their best lives.

Her work has been featured in The New York Times, The TODAY Show, The Wall Street Journal, Business Insider and many more top media outlets.

Read Mariah Ackary's full bio
Claire Dickey
Reviewed By
Claire Dickey
Claire Dickey

Claire Dickey

Senior Editor

Claire is a senior editor at Newsweek focused on credit cards, loans and banking. Her top priority is providing unbiased, in-depth personal finance content to ensure readers are well-equipped with knowledge when making financial decisions. 

Prior to Newsweek, Claire spent five years at Bankrate as a lead credit cards editor. You can find her jogging through Austin, TX, or playing tourist in her free time.

Read Claire Dickey's full bio

The last few years have been whiplash-inducing for student loan borrowers. Payments were suspended month after month. Some debt was canceled—and then it wasn’t. Now that the final federal forbearance period is over and payments are due again, student loans are top of mind for millions of Americans.

Here’s everything you need to know about the current state of student loan forgiveness, from legacy programs based on your career industry to President Biden’s new Saving on a Valuable Education (SAVE) Plan.

Vault’s Viewpoint

  • In some cases, the government can declare your federal student loans forgiven. This means that you don’t have to pay back some or all of your loans.
  • President Biden’s original student loan forgiveness program isn’t happening. The Supreme Court voted against Biden’s plan to forgive $10,000–$20,000 of federal student loan debt per borrower in June 2023.
  • However, the Biden administration’s new SAVE Plan can lower monthly payments down to $0 for many borrowers. Instead of one-time relief, the SAVE Plan is an income-driven repayment plan that’s more generous than previous income-driven repayment (IDR) plans. The Department of Education calls it their “most affordable repayment plan ever.” 

What Is Biden’s Student Loan Forgiveness Program?

President Biden’s one-time student debt relief program was struck down by the Supreme Court in June 2023. The plan would have forgiven $10,000–$20,000 of federal student loan debt for borrowers up to certain income thresholds.  

Given the court’s decision, that’s not going to happen now, but there are other loan forgiveness programs available. Also, though it isn’t really a forgiveness program, President Biden’s new SAVE Plan (detailed at the end of this article) can drastically reduce monthly payments. 

Who or What Qualifies for Student Loan Forgiveness?

  • Teachers: Teachers Loan Forgiveness cancels up to $17,500 of loans for teachers who work for five consecutive academic years in a low-income school or education facility that teaches high-need students.
  • Public servants: Government employees and 501(c)(3) not-for-profit workers who have Direct Loans are eligible for Public Service Loan Forgiveness (PSLF). The PSLF Program forgives the remaining balance on your Direct Loans once you’ve made 120 qualifying monthly payments (or paid the equivalent amount) while working full-time for a qualifying employer.
  • People with disabilities: Your debt balance may be discharged if you are totally and permanently disabled and have a Direct Loan, Federal Family Education Loan (FFEL) Program loan or Federal Perkins Loan.
  • People who have been paying off loans for 20+ years: All income-driven repayment plans may discharge remaining debts after 20 or 25 years. As of 2023, past payments will count toward this requirement even if you weren’t enrolled in an IDR at the time. The federal government will automatically review all accounts for this forgiveness opportunity, and if you’ve overpaid, you will get a refund. 
  • If your school closed down or misled you: Closed school discharge and borrower defense discharge protect borrowers from schools that don’t deliver on their promises. 
  • Perkins Loan borrowers: Once you’ve completed eligible employment or volunteer requirements (including in education, firefighting, the military or the Peace Corps), your debt may be eligible for forgiveness. 
  • Forgery victims: Those who have their identity stolen or have loans taken out in their name without their knowledge may be eligible for loan discharge. 
  • Those who file for bankruptcy: If you’ve declared bankruptcy or plan to, you can file a motion in bankruptcy court to have your student loans discharged. This is called an “adversary proceeding.” 
  • Death: Federal student loans are forgiven if the borrower or the student on whose behalf a PLUS loan was taken out dies.

Do I Have To Apply for Student Loan Forgiveness?

In most cases, you do have to apply for student loan forgiveness. 

The exception to this is for people who have been paying their loans down for more than 20 years. The federal government will notify borrowers who reach the necessary forgiveness threshold of 240 or 300 months of payments.

You can apply for all types of forgiveness on StudentAid.gov, and you should avoid applying on other sites. 

How Do I Know My Student Loans Are Forgiven?

When your loans are forgiven, you’ll receive an official communication from the Department of Education. You might get this electronically, through physical mail or both. When you apply for loan forgiveness on StudentAid.gov, make sure your contact information is correct so that you don’t miss important communications about your loan status. 

The letter should detail the total forgiveness amount, the discharge date and any refund amount if applicable. 

Are Forgiven Student Loans Taxed?

The American Rescue Plan Act (ARPA) prohibits federal student loan forgiveness from being taxed until 2025. 

Assuming the laws revert after the American Rescue Plan Act expires, most types of loan forgiveness still will not be taxable, including Public Service Loan Forgiveness and Teacher Loan Forgiveness. 

The exception is loan discharges under IDR plans—the amount that gets forgiven is subject to federal income taxes. For example, if you have $10,000 of student loans discharged, your taxable income for that year will increase by $10,000. 

Are Student Loan Payments Still Paused?

The federal student loan forbearance program that began in March 2020 officially ended in September 2023. Interest began accumulating on September 1, and the first payments were due in October. 

What Is a Pell Grant?

Unlike a loan, Federal Pell Grants do not have to be repaid (except in special cases). They’re awarded only to undergraduate students who have exceptional financial need and have not already earned a bachelor’s degree or higher. 

When you fill out a FAFSA form, you are automatically considered for Pell Grants, along with other types of federal student aid. The amount awarded depends on your family’s income, your school’s cost of attendance, your status as a full-time or part-time student and the length of time you plan to attend school. 

How To Check if I Had a Pell Grant

Log in to StudentAid.gov to see your aid history, including whether you received a Pell Grant. 

Sometimes, this information can be delayed. Reach out to your school’s financial aid office if the information isn’t correct. 

What Types of Loans Are Eligible for Student Loan Forgiveness?

Federal Loans 

There are four main types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans (for graduate students) and Direct Consolidation Loans. All are eligible for some types of student loan forgiveness, though individual forgiveness programs may have varying requirements.

FFEL Program Loans

Under the Federal Family Education Loan (FFEL) Program, private lenders made education loans that were guaranteed by the federal government. 

  • These loans included Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans and FFEL Consolidation Loans. 

No new loans under the FFEL Program have been made since June 30, 2010, but existing FFEL loans are eligible for some types of student loan forgiveness.

Federal Perkins Loan

Federal Perkins Loan Program loans are low-interest federal student loans for both undergraduate and graduate students with exceptional financial need. 

No new loans under the Federal Perkins Loan Program have been made since September 30, 2017, but existing Perkins loans are eligible for forgiveness.

What Types of Loans Are Not Eligible for Student Loan Forgiveness?

Private student loans are not eligible for student loan forgiveness. This includes loans taken out with banks, credit unions, state agencies or schools. 

What Is the New Income-Driven Repayment Plan?

Following the Supreme Court’s decision to strike down President Biden’s loan forgiveness plan, the Biden-Harris administration debuted a new program, the SAVE Plan. It’s a bit more complicated and applies to fewer people, but it’s helpful for many low- and middle-income borrowers. 

Unlike Biden’s first plan, the SAVE Plan does not provide immediate loan forgiveness. Instead, it’s an income-driven repayment (IDR) plan that can reduce your monthly payments as well as the total years you have to pay before your remaining balance is forgiven. It’s most applicable to low- to middle-income borrowers. 

How IDR Plans Work

Many income-driven repayment plans calculate your discretionary income to determine how much your loan payment should be each month. Traditional IDR plans say that your discretionary income is the difference between your salary and 150% of the federal poverty guideline.

  • In 2023, that poverty guideline is $14,580 for a single person, and 150% of that is $21,870. So, someone with a $50,000 salary would have a discretionary income of $28,130. 

IDR plans specify a percentage of that discretionary income—usually 10%—for your annual student loan payment amount. Using the same salary example as above, that would be $2,813 annually, which works out to a monthly payment of about $234. You would make that payment for a certain number of years (though the payment would change as your income changes), and then your remaining debt would be forgiven. 

How SAVE Works

The SAVE Plan follows this general structure, but it’s more generous than other IDR plans in several ways. 

Lower Monthly Payments

The SAVE Plan considers your discretionary income to be the difference between your salary and 225% of the federal poverty guideline—not 150%. That translates to a lower discretionary income and a lower monthly payment.

  • In this $50,000 salary example, that translates to loan payments of about $1,720 per year or $143 per month. 
  • A single borrower earning $32,800 or less or a family of four earning $67,500 or less (the amounts are higher in Alaska and Hawaii) will have loan payments of $0 per month. 

No Interest

If you make your monthly payment, your loan balance won’t grow due to unpaid interest. That means you won’t find yourself owing more after years of making payments.

Shorter Forgiveness Window 

Under SAVE, those who borrowed $12,000 or less can have their remaining debts forgiven after 10 years of payments. Every $1,000 over the $12,000 mark adds an extra year of required payments, with a maximum of 20 years for undergraduate loans and 25 years for graduate loans.

Applying for SAVE

If you were already enrolled in the Revised Pay As You Earn (REPAYE) Plan, which is being replaced with SAVE, you’ll be automatically enrolled in SAVE. Otherwise, you can apply for SAVE through the Department of Education. 
If you’re not sure if SAVE makes the most sense for your situation, you can run your information through the Department of Education’s loan simulator, which will give you estimated monthly payments and payoff timelines for a variety of repayment strategies.

Frequently Asked Questions

Do I Need To Make Loan Payments While My Application Is Being Reviewed?

It depends. Most types of loan forgiveness allow you to suspend payments while your application is being reviewed, but you should always check with your loan servicer.

What Happens if I Can’t Resume Student Loan Payments?

You’re not alone if you find yourself struggling to find space in your budget for student loan payments after three years without them. First, you should try the Education Department’s loan simulator to see how much you can lower your monthly payments. 

If loan payments just aren’t in the cards right now, you can explore deferment or forbearance with your loan servicer. Usually, if you demonstrate financial need, loan servicers will allow you to pause payments for a little while. However, unlike the COVID-19 forbearance, interest will continue to accrue during this period. For example, a loan balance of $30,000 with a 6% interest rate would accumulate about $1,800 in interest while in forbearance for one year.

What Is Fresh Start Relief?

Fresh Start is a one-time temporary program from the Department of Education that provides relief for borrowers with defaulted federal student loans.

Fresh Start automatically restores access to federal student aid and brings your defaulted loans back into “repayment” status. Most borrowers who enroll in Fresh Start choose an income-driven repayment plan.

Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.

Mariah Ackary

Mariah Ackary

Contributor

Mariah is a freelance contributor to Newsweek’s personal finance team. After putting herself through college, Mariah became interested in using personal finance to achieve financial freedom—whether that means paying down debt or using credit card points to take a dream vacation. She’s written and edited hundreds of articles about the topic and feels passionately about helping other millennial and Gen Z women live their best lives.

Her work has been featured in The New York Times, The TODAY Show, The Wall Street Journal, Business Insider and many more top media outlets.

Read more articles by Mariah Ackary