Biden’s Student Loan Forgiveness Plan

Hello everyone,

The day has finally come: Biden has made a decision on the COVID Forbearance extension and loan forgiveness. I’m relieved I will never have to answer another question about whether I think these things are going to happen, or not. Now we know!

✅The extension on the forbearance will be effective immediately (though it may take a week or two for servicers to reflect this online) and payments won’t be due until January 2023.

?In the next few weeks, an online application process will become available at, where you can apply for the forgiveness. I’ll be sending a newsletter and updating my Facebook page with more information about the process in the coming days and weeks.

All the details aren’t out yet, but here’s what we do know:

1) All FFELP, Direct and Parent Plus borrowers who make less than $125,000 individually, or $250,000 jointly, will receive $20,000 in loan cancellation if they received Pell grants, and $10,000 in loan cancellation if they did not receive Pell Grants.

If you don’t know whether you received a Pell Grant:

Please log into your account at and your Pell Grants will be listed next to your balance on the Dashboard – if you had any.

2) The student loan cancellation is tax free! The Covid Relief Package eliminates taxation on all student loan forgiveness until 2025.

3) The loan cancellation applies to all loans disbursed before June 30, 2022.

Income Driven Repayment Changes

Most of these IDR changes do not apply to borrowers who have grad debt. However, there are some IDR changes that appear (based on the language of the briefing, absolute confirmation yet to come) to apply to everyone, including high income earners and grad borrowers.

1. The poverty line for the payment calculation is being raised to 225% for all borrowers, even graduate school and Parent Plus borrowers. This will have a small impact for incomes deep into the six figures, but a more significant benefit income for borrowers with incomes below $60,000.

  • For example, if a grad borrower makes $200,000, this change will lower their IDR payment by about $75/month for student borrowers and $165/month for Parent Plus borrowers.
  • If the same borrower’s income is $50,000, it will lower their IDR payment by about $150/month for the student borrower and almost $300/month for Parent Plus borrowers.
  • For single borrowers with only undergrad debt, with a $50,000 income, it will lower their payment from $250/month to $80/month.

For all borrowers, unpaid interest is a thing of the past – your balance will no longer increase even if your monthly qualified payment is below the amount of interest that accrues on your loan monthly. This is a game changer for many who are prepping for the potential forgiveness tax bomb on IDR plan forgiveness.

Everyone’s forgiveness happens in 20 years now, even if you are in a 25-year program like IBR, ICR or REPAYE for grad borrowers.

2. For borrowers with only undergrad loans, the White House proposed IDR changes are huge. Payments for undergrad borrowers will be based on a 5% IDR formula instead of 10% or 15%.

For all undergrad borrowers with an original balance below $12,000, they will receive IDR forgiveness in 10 years instead of 20 or 25 (even if they don’t qualify for PSLF).

And that covers everything important that’s available presently.

Need further clarity on the updates, or someone to talk it through with? Visit my consultations page and set up a consultation at your convenience.

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