Student Loan Debt Relief Program – Info & Updates

Last Updated on April 4, 2023 by VantagePoint

For many people, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. Announced back in August 2022, President’s Biden student debt relief plan offers targeted debt relief as part of an effort to address the burden of increasing college costs and make the student loan system more manageable for working families.

What Is Federal Student Loan Debt Relief?

Federal student loan debt relief is a newly-released program that provides eligible borrowers with the total or partial release of loans up to $20,000 to Federal Pell Grant recipients and up to $10,000 to non-Pell Grant recipients.

The Pell Grants are awarded to undergraduate students with exceptional financial needs, determined by filling out the free application for federal student aid, commonly known as the FAFSA. Most recipients come from families with incomes under $40,000 a year, according to the Institute for College Access & Success. 

The debt relief will be applied to eligible loans (undergraduate, graduate, or parent loans). The Pell Grant could have been for any amount and doesn’t need to be from the same program of study or from the same school as the federal student loan.

Applicants are not required to provide proof of being the recipients of the Pell Grants and they can check to find out if they received one, by logging in to StudentAid.gov and going to “My Aid.”

Who Can Qualify for Federal Student Loan Debt Relief?

The program applies to those earning less than $125,000 a year – or households/ families earning less than $250,000 – and most applicants will have $10,000 of debt canceled.

In order to qualify for this debt relief program, individuals will have to have earned less than $125,000 in 2021 or 2020, and families, less than $250,000 in 2021 or 2020.

How Much Debt Relief Can You Get?

• Up to $20,000 in debt relief if you received a Federal Pell Grant in college and meet the income requirements. You need to meet the income criteria for either 2020 or 2021, but you don’t need to meet it for both years. If you have eligible federal student loans and meet the income requirements, it doesn’t matter if you’ve been actively repaying your loans or are still in school, have a grace period, or default. For recently enrolled undergraduate students, more precisely those who enrolled as undergraduate students between July 1, 2021, and June 30, 2022,  who were born after Jan 1, 1998, and who are not married there is the possibility to be classified as a dependent student. This would make them eligible for the same debt relief as everyone else, but the eligibility is based on one or both of the parents’ incomes, not the applicant’s income.
• Up to $10,000 in debt relief if you didn’t receive a Federal Pell Grant in college and meet the income requirements.

How Can You Apply for the Federal Student Loan Debt Relief Program?

The application is open to those who qualify until December 31, 2023. After submitting the Student Loan Debt Relief Application, applicants will receive email confirmation pending review and confirmation of eligibility for the debt relief. It will take 4-6 weeks for the application to be processed and for the DOE to apply for the cancellation. Ideally, the application form should be submitted before November 15th, 2022 to avoid interest occurring on payments beginning in January 2023.

For extra information, applicants will be contacted directly by email and once the eligibility is confirmed, they will be notified and the program will provide this information to their loan servicer. 

After this, the loan servicer will apply the debt relief directly to the applicant’s account, each loan servicer will notify the applicant separately, letting them know if their loans are paid in full or have an outstanding balance. If the applicant has an outstanding loan balance, they will be notified what the new monthly payment will be once payments resume after Dec. 31, 2022. 

An important note here is if the applicant made payments during the payment pause (from March 13, 2020, through Dec. 31, 2022) that brought the balance below what they are eligible for ($10,000 or $20,000) but didn’t pay off the loan in full, the program we’ll refund those payments automatically.

Application Form

The application form is available here, it’s easy to fill in, no need to create an account or provide extra documentation. For individuals who are not able to apply online, there is going to be a paper form available soon, as per the program’s announcements.

Are Your Employees Eligible for Student Loan Debt Forgiveness?

Supporting your employees to apply for student loan forgiveness can help boost employee morale and strengthen the connection between your company and your employees. Many employees may be unsure what to do or when and how to apply for this new program. The new debt cancellation plan can help your employees make headway in their financial worries.

For employers and the human resources department, sending out a memo on the government’s student loan debt cancellation can be an easy win, with up-to-date information and links redirecting to the application process. 

The memo can include info like eligibility criteria, where they can apply and what is the deadline for application, what info should they provide in the application form, how long processing the application will take, and when is the best time to submit the application so that debt will be canceled before the new year. 
Financial wellness benefits have been employees’ first concern during these troubling economic times. To make things easier and build trust, your company can offer different financial benefits for your employees. This can help you attract some new talent.

Updates to the Program

On Oct 24th, 2022,  the program’s website announced that “as a result of a court order, we are temporarily blocked from processing debt discharges. We encourage you to apply if you are eligible. We will continue to review applications. We will quickly process discharges when we are able to do so and you will not need to reapply.” This comes after a federal appeals court temporarily blocked the student loan debt plan after a motion from six states was filed to stop the program. As the White House press secretary, Karine Jean-Pierre said in a statement on October 21st. “It merely prevents debt from being discharged until the court makes a decision.”  The Education Secretary Miguel Cardona said on October 23rd that “the administration is moving full-speed in preparing for the implementation of its plan or widespread student debt forgiveness.”

We’ll keep you up to date with any changes and updates regarding the Federal Student Loan Debt Relief program!

If you need guidance or expert advice, as an employer or an employee, get in touch with our team!