The Biden administration is preparing to roll out its new one-time student loan forgiveness initiative, which may provide relief for millions of borrowers. But some of the eligibility rules recently changed, as the administration faces mounting legal challenges to the program before it even gets off the ground.
Here’s where things stand in terms of eligibility, and how to find out if your student loans qualify for forgiveness.
Biden’s One-Time Student Loan Forgiveness Plan
Under President Biden’s new one-time student loan forgiveness plan, millions of student loan borrowers can get up to $20,000 in federal student loan forgiveness. If a borrower received a Pell Grant, they could be eligible for up to the full $20,000 in loan forgiveness, while other borrowers can receive up to $10,000. To qualify, borrowers must have earned less than $125,000 (or less than $250,000 if they are married) in either 2020 or 2021.
But when it comes to which student loans qualify for relief, it gets a little tricky. All government-held federal student loans, including undergraduate, graduate, and Parent PLUS loans, are potentially eligible for relief. This would include Direct federal student loans, as well as FFELP loans that are in default or already administered by the Education Department. Private student loans and — following an abrupt policy change last week — most commercially-held FFELP loans do not currently qualify.
But how do you determine if a federal loan is government-held?
Direct Federal Loans Qualify For Student Loan Forgiveness Under Biden’s Plan
All federal student loans issued under the Direct loan program are, by definition, government-held federal student loans. Direct loans are originated directly by the US Department of Education, which then continues to hold the loans even though it contracts out servicing and operations to various third-party loan servicers.
If your Stafford, Consolidation, Graduate PLUS, or Parent PLUS loan is designated as a “Direct” loan, then it should be eligible for relief under Biden’s one-time student loan forgiveness initiative, provided the other eligibility criteria (such as income) are also met.
Borrowers can log into their student loan servicing account, or log into their Department of Education account at StudentAid.gov, to determine whether the applicable loans are Direct loans.
Direct and FFELP Loans In Default Qualify for Student Loan Forgiveness Under Biden’s Plan
According to the Education Department’s guidance as of this writing, defaulted federal student loans — which “includes [Education Department]-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins loans held by [the Education Department] — qualify for student loan forgiveness under the plan. To break this down more clearly, this includes:
- All defaulted Direct-program student loans;
- All defaulted FFEL-program student loans, regardless of whether they are held by the Education Department or a commercial guarantee agency;
- Defaulted Perkins loans, but only if they are held by the Education Department.
If you’re not sure whether you have federal student loans in default, log into your Department of Education account at StudentAid.gov, which will show the current status of your outstanding federal student loans.
FFELP Loans and Perkins Loans Held by the Government Qualify For Student Loan Forgiveness Under Biden’s Plan
FFEL-program loans are federal student loans that were originated by a private or commercial lender, although they are backed by the government. Some of these FFELP loans have since been transferred to the Education Department, although many others have not.
FFELP loans currently held by the Education Department qualify for student loan forgiveness under the Biden plan. But it can be a little difficult to figure this out. There are two ways to determine whether your FFELP loans are government-held:
- If your FFELP loans have been in the Covid-19 forbearance, which has suspended all payments and interest since March 2020 in response to the pandemic, that is a good indication that your loans are government-held.
- You can also log into your Department of Education account at StudentAid.gov to get more details on your current loan servicer. If your loan servicer has a Department of Education designation (for example, “DEPT OF ED / NELNET”), that would suggest that the loan is government-held.
Most Commercially-Held FFELP Loans No Longer Qualify For Student Loan Forgiveness Under Biden’s Plan
Commercially-held FFELP loans in good standing (non-defaulted FFEL-program loans that are not held by the Department of Education) no longer qualify for the one-time student loan forgiveness plan as of September 29, 2022. The Biden administration had originally indicated that borrowers could consolidate these loans into a federal Direct consolidation loan to qualify, but abruptly changed the rules in response to mounting legal challenges by states and FFEL-program lenders.
There is one important exception, however. “Borrowers with FFEL Program loans and Perkins Loans not held by [the Department of Education] who have applied to consolidate into the Direct Loan program prior to Sept. 29, 2022, are eligible for one-time debt relief through the Direct Loan program,” says the administration in current guidance.
The administration is exploring other possible solutions for borrowers with commercially-held FFELP loans.
Next Steps for Borrowers Seeking Student Loan Forgivenes
The Biden administration has indicated that a simple student loan forgiveness application will be available sometime this month. Borrowers will have until the end of 2023 to apply for relief under the program. However, legal challenges could interfere with the rollout of the plan, so borrowers should be vigilant and stay on top of new developments.
Borrowers can review current guidance on the initiative here.
Further Student Loan Reading
Biden Administration Reveals Potential Start Date For Student Loan Forgiveness, But There’s A Catch
In Reversal, Biden Administration Announces New Eligibility Limits On Student Loan Forgiveness
5 Key Takeaways From The Sudden Change To Student Loan Forgiveness Eligibility
Biden’s Student Loan Forgiveness Could Be Taxable In Some States