+ How much will be forgiven?

Up to $10,000 of federal student loans can be forgiven if your income is below $125,000 as an individual (and under $250,000 if part of a household) in either the 2020 or 2021 tax year.

If you ever received a Pell Grant while in school, you are eligible to get up to $20,000 forgiven. This situation has the same income eligibility requirement. (*Note: Pell Grants are not loans and don't have to be paid back, so this is not forgiving the Pell Grant itself. The Biden Administration is trying to offer lower income families additional forgiveness and they have chosen to use Pell Grant eligibility as a way to do that because Pell Grants are offered to families with lower income.*)

The language says "up to" $10,000 for those who have student loan balances less than the eligible amount. For example if someone has $5,800 in total federal student loans, that is the maximum they will get forgiven.

+ How do I find out if I received a Pell Grant?

This information will be in your financial aid record.

1) Login to your account at studentaid.gov 2) Find the "my aid" button either in your profile drop down menu or on the right side of your dashboard. 3) In the "my aid" section you will automatically be set to the "loans" tab. Click on the "grants" tab and you will find out there if you received a Pell Grant.

+ Will the forgiven amount be taxed?

No, at least not at the federal level. There are some states where the forgiven amount could be counted as income.

Teacher Wealth focuses on helping educators in the state of Iowa. There should be no Iowa state tax on any forgiven amount of student loans based on what I have read but I am not a tax expert and am trying to confirm this.

+ What amount of income makes me ineligible for forgiveness?

You will be ineligible if you have incomes above:

-- $125,000/year if single

-- $250,000/year if married (or head of household)

We are most likely talking about AGI as the income definition and you can meet the eligibilty requirement on either the 2020 or 2021 tax return. (Still trying to confirm this with an official source.)

+ Are private student loans eligible for forgiveness?

No. Only Direct federal student loans are eligible for this program.

+ Are current students eligible for student loan forgiveness?

Yes. As long as the federal student loan was funded by June 30, 2022.

The big qualifier here is if the student was claimed as a dependent by their parents, then the parent's income will be used for the income eligibility requirement not the student.

+ Are Parent PLUS loans eligible?

Yes! These are loans in the parent's name taken out for the education of their child(ren). Because they are federal Direct student loans, these are eligible for the full forgiveness amount.

This means a borrower could be eligible for forgiveness on their own loans AND their parents can also be eligible if they took out a Parent PLUS loan.

+ Are loans in default eligible?

Yes.

+ What if I only have graduate study loans because I either didn't need loans for undergrad or I have paid those off?

As long as the loans are federal loans (whether undergraduate, graduate, subsidized, unsubsidized, Grad Plus loans, Parent PLUS loans) they are eligible for forgiveness.

So, yes, grad loans are eligible as long as you meet the other requirements.

+ Do I need to do anything to get this forgiveness?

Yes, for most people there will be an additional step to take.

If the Department of Education already has your income on file with the relevant information, then this should be done automatically. This is likely for people who are on an income based repayment plan already because they have to report their income annually. And potentially if recent/current students have used the linking tool connecting their tax information when completing the FAFSA.

Otherwise, there will be a "simple" application made which will be available by early October 2022.

If you would like to be notified when the application is open, you can sign up at the Department of Education subscription page.

+ When will the online application be available?

Early October 2022.

+ How long do I have to apply for debt cancellation?

You will have until December 31, 2023. So a little over a year.

It is probably a good idea to apply as soon as the application becomes eligible.

+ What happens if I still have debt remaining after cancellation happens?

Loans will be re-calculated based on your new balance potentially lowering your monthly payment.

+ What if I didn't finish college?

If you didn't finish college but have federal student loan debt and meet the income requirements you are eligible for forgiveness.

In fact, people in this situation are one of the main groups the Biden Administration is trying to help with student loan relief.

+ I have heard that this forgiveness plan is illegal, is that true?

Good question. First, I am not an attorney. But, some who were expecting this announcement think that it will be challenged in the courts.

The Biden Administration is arguing they have legal authority based on the "HEROES" Act.

Forgiving student loans has never been done before by a President using an executive order. Some believe it needs Congressional approval to do something like this. So time will tell whether this will be challenged and what any decision by the courts will be.

On the other hand, the second part of President Biden's plan of adding a new income-based repayment plan is less likely to be challenged, although elements of this plan as announced could. There is precedent of past Presidents adding addtional student loan repayment plans by executive order.

+ Is the student loan payment pause being extended?

Yes. The payment pause is being expended "one final time" until December 31, 2022. Expect to start up payments again (if a loan balance remains) in January 2023.

+ What if I made payments during the payment pause, I'm hearing I can get a refund. Is this true?

Yes, most likely.

According to the studentaid.gov website "You can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020). Contact your loan servicer to request that your payment be refunded."

Some people took advantage of paying down their loans even though they didn't have to while interest was not accruing. Now this looks like less of a good idea, particularly if they have paid down amounts that would now be forgiven.

Especially if you paid down amounts where your total balance is now under $10,000 (or $20,000 if you had a Pell Grant) it is likely a good move to request a refund.

For example, lets say you had $9,000 in federal loans right before the payment pause.  You continued to pay your monthly payment as well as chunking some dollars toward the loans when you had extra cash.  You now have a balance of $4,000.  It would be beneficial to request a refund of the $5,000 of payments that you made that you didn't have to so when you are able to apply for the up to $10,000 in loan forgiveness, you get the $9,000 forgiven instead of only $4,000.

Only payments made during the payment pause (beginning March 13, 2020) are eligibile for this refund.

If this is situation sounds like you, it is probably a good idea to request the refund as soon as possible. There is a timing situation here and you probably don't want to procrastinate.

Even if you completely paid off your loan during the pandemic payment pause (not beforehand) it is worth attempting this strategy.

+ What are the details of this new income-driven repayment plan?

First, let me state that there are already five income-driven plans in existence. This would add a sixth. It would not replace the others, but add to the others as choices borrowers can make.

This gets complicated really quick because most borrowers don't understand these options and each additional plan adds layer on top of layer of confusion. Many borrowers are already not in the best income-driven plan based on their specific situation.

This new income-driven repayment option could offer unbelievable advantages to some borrowers but it doesn't mean that it is the best for all situations.

Here are the details:

• If the borrower has undergraduate loans, the monthly payment is capped at 5% of discretionary income (instead of 10% of other plans).

• The formula that creates the monthly payment will use 225% of the poverty level (instead of 150% in other plans). All you need to know here is that this decreases borrower's monthly payment even more.

• If a borrower has an original loan balance of $12,000 or less, then it will forgive the loan balance after 10 years of payments (instead of the 20 years in other plans).

• The borrower's unpaid monthly interest is subsidized by the government. This means that a borrower's loan balance will NOT grow as long as they make their monthly payments, even when their payment will not cover the earned interest (and even if the monthly payment is zero).

It is probably a good idea for borrowers under the income-driven repayment plan to review to make sure they are using the best plan for their unique situation.

This is very relevant to teachers because most educators are also eligible for PSLF (Public Service Loan Forgiveness).

+ When will this new income-driven repayment plan be an option?

The most likely scenerio is that it won't be available until the summer of 2023, at the earliest.

+ Does this extend the PSLF waiver deadline?

No! The deadline is still fast approaching (October 31, 2022).

This is looking like a once-in-a-lifetime special opportunity to fix some of the issues with the PSLF loan forgiveness program over the years.

In fact, the White House and President Biden have gone out of their way to tell borrowers who work in public service jobs to look into the PSLF program to see if it will benefit them before it is too late.

Biden's forgiveness plan is limited to $10,000 (or $20,000) in debt, but the PSLF waiver allows forgiveness in the tens or hundreds of thousands of dollars if someone qualifies.

I do help people review their student loan situation and what is their best course of action in case you need it. If you haven't already checked into the PSLF waiver you might thank yourself by looking into it this week!

There are teachers in classrooms today who literally just need to complete a form and their entire student loan balance will be forgiven because they have already paid 10 years worth of payments. And others who can have their loans forgiven in a short amount of years if they get on the PSLF program.

By the way, this is not a program for teachers specifically. This is for public servants! It is based on your employer whether you are eligible. There are nurses, doctors, and medical staff who work for non-profit hostpitals who are eligible. Members of the military are eligible. ANY employee at a public school is eligible, not just an educator (administrators, teacher aides, support staff, janitors, bus drivers, etc.) Spread the word to friends and family who might be eligible. October 31st is coming quickly!

If you are wanting more information about the PSLF waiver I created a quick video course explaining it. It is FREE. You can check it out HERE.

+ What do I do if I have a question that isn't on this FAQ?

If you have a question that is not listed, you can ask it HERE. I will take a look at it.

+ How do I get notified when updates are announced with Biden's plan?

If you want to get notified when major changes are announced go HERE to get on an email list for updates.