NAICU Washington Update

More Details Emerge Regarding Student Loan Debt Forgiveness

September 09, 2022

While the broad parameters of President Biden’s executive action on student loan forgiveness have been widely publicized, the Administration has now provided additional detail on the process borrowers must take to apply for forgiveness and the types of loans that will be forgiven. The President’s executive order reported that borrowers making up to $125,000, and families making up to $250,000, would be eligible for student loan debt relief. Borrowers who received a Pell Grant would be eligible for up to $20,000 in debt relief and all other borrowers would be eligible for up to $10,000 in debt relief. 

Following are the new details that have emerged regarding how the Administration plans to implement this one-time student loan debt forgiveness. 
  • Online applications for forgiveness will be available beginning in October and borrowers can apply until December 31, 2023. 
  • In order to receive forgiveness, borrowers need to log in to their account on and make sure their contact information is up to date. If a borrower does not have a account, they should create one
  • All loans, with the exception of private loans and loans not held by the Department of Education, will be eligible, including defaulted loans. Borrowers with privately held Federal Family Education Loans (FFEL) loans would have to convert their loans to direct loans to become eligible for forgiveness.
  • Borrowers can receive no more than $20,000 in student loan forgiveness for Pell Grant recipients and no more than $10,000 in student loan forgiveness for all remaining borrowers, regardless of total outstanding student loan balances. 
  • For borrowers with multiple loans, forgiveness will be applied in the following order:
    • Defaulted loans held by the Department;
    • Defaulted commercial FFEL program loans;
    • Non-defaulted Direct loans and FFEL loans held by the Department; and 
    • Perkins Loans held by the Department.  
  • If a borrower has multiple loans in a program type (e.g., multiple Direct loans), forgiveness will be applied in the following order:
    • Loans with highest statutory interest rate; 
    • If interest rates are the same, unsubsidized loans prior to subsidized loans; 
    • If interest rate and subsidy status are the same, most recent loan taken out by the borrower; and  
    • If interest rate, subsidy status, and disbursement date are the same, the loan with the lowest combined principal and interest balance.
  • A borrower will not have to pay federal income tax on debt forgiveness but could be subject to state income tax. 
  • The Department would use tax years 2020 or 2021, whichever year has the lower income amount, to allow borrowers to receive automatic debt forgiveness. 

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