Will You Benefit from Biden’s Student Loan Relief?

Article Highlights:

  • • Relief Amounts

  • • Income Limitations

  • • Dependents of Another

  • • Pell Grant Recipients

  • • Repayment Pause

  • • Monthly Payment Reduction

  • • Cancellation of Debt Income

On August 24, President Biden announced a three-part plan to deal with student loan debt which includes, among other things, $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief. Current students with loans are eligible for this debt relief.


Pell Grant Recipients


Amount To Be Forgiven

Up to $20,000

Up to $10,000

Income Limit

Married Filing Jointly $250,000

Others $125,000

Note: This is not a phaseout, $1 over the income limit ends the qualification.

Dependents of Another - Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.

Who Will Benefit? – Since the forgiveness is targeted to lower income families, per a White House Fact Sheet, nearly every Pell Grant recipient comes from a family that made less than $60,000 a year. Based on that at least 93% of Pell Grant recipients have income less than $60,000 and would qualify for the $20,000 forgiveness.


Family Income


$30,000 or Less


$30,001 through $59,999


$60,000 or more


Apparently the White House used rounded numbers thus the total is not 100%

The Department of Education estimates that, among borrowers who are no longer in college, nearly 90% of relief dollars will go to those earning less than $75,000 a year.

Repayment Pause – Repayments were previously paused as part of the COVID relief. That pause has been extended one last time until December 31, 2022. Borrowers should plan to resume payments in January 2023.

Monthly Payments Cuts - The program would also cut monthly payments in half for under-graduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future bor-rowers.

It is estimated that nearly 8 million borrowers will be eligible to receive automatic relief because income data is already available to the U.S. Department of Education. If not, a borrower will be able to provide that information when the department makes a simple application available in the coming weeks. Watch for additional details.

Normally, per the tax code, when debt is forgiven the amount relived is treated as taxable income. That issue is not addressed in the Fact Sheet from the White House.

If you have questions, please give this office a call.

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