Student Loan Forgiveness Changes - What They Mean To You

September 06, 2022


You have probably heard that President Biden announced some federal student loan forgiveness. And you may be wondering how it will affect you.  Many of our clients have taken the ostrich approach to their student loans during the pandemic payment pause – and that has not been a problem.  But payments will start back up in January 2023 and they have made it clear that this most recent payment extension will be the last.  So, what are the important points and what should you be doing in the next couple of months?


  1. Forgiveness is $10,000 for most federal borrowers but is subject to income limitations. For single filers, the income limit is $125,000 on your 2020 or 2021 tax return.  For married borrowers, the income limit is $250,000.  Only Pell grant recipients are given $20,000 in student loan forgiveness and no one will have to pay income tax on the amount forgiven. 
  2. It is still unclear what you will need to do to get forgiveness. If you are on an income-driven repayment plan, they already have your income information, so you may have your forgiveness applied automatically.  For everyone else, we are anticipating an application process opening around October 1 that will be found at  The deadline for applying for forgiveness is expected to be Dec 31, 2022. 
  3. One of best changes in this executive action is that the formula used to determine loan payments under the income driven repayment plans has changed. The old formula dedicated 10% of disposable income toward repayment. The new formula reduces that to 5%.   If you aren’t on an income driven repayment plan, you may want to consider it.  If you are on one of the plans, you will certainly want to confirm your income and make sure you are up to date with them, so your payment is affordable.
  4. These lower payments will mean your loan balances will increase over the 20 years of repayment. Any balance left over will be forgiven.  Current tax law states you will need to pay income tax on the amount forgiven.  This means that you will need a strategy for knowing what that amount may be and saving to cover the tax liability.
  5. For Public Service loan forgiveness, there is an earlier deadline of October 31, 2022. The government is issuing credit for past payments even if you don’t currently work for an eligible employer.  If you believe you are eligible and haven’t been successful, go to and look for help there.
  6. Parent Plus loans are also subject to the $10,000 forgiveness, but the parents’ income must be used in determining eligibility – not the students’ income.
  7. If you have been paying your student loans during the pause and your balance is under $10,000, you may benefit from requesting a refund of payments made. Your loan balance will go back up, but you can then apply for the $10,000 forgiveness.

There are still some questions that we don’t have answered, and things could still change.  If you are struggling with how this affects you with your unique situation, please reach out.  We would be happy to help you make sense of this challenging subject.