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Details Slowly Emerging on Biden Administration’s Loan Forgiveness Plans

On August 24, the White House unveiled its plan to forgive significant portions of federal student loans for millions of Americans. At the same time, the pause on Direct student loan payments was extended to December 31, reportedly the last such extension that will be granted. Please note that the planned balance reductions and the extended payment moratorium are separate from the Public Service Loan Forgiveness waiver period that was announced last October 6, and that is still set to expire on October 31.

While precise details of when and how the lump-sum forgiveness plan will take effect, there are several elements of the plan worth noting:

  • There are income limits that will govern who receives balance reductions. Individuals who earn $125,000 or less per year will see their federal student loan balances reduced by up to $10,000. These borrowers won’t receive checks in the mail; their loan balance will be reduced. Married couples earning less than $250,000 will also be eligible for $10,000 in relief. Using those same income guidelines, the government will forgive up to $20,000 for borrowers who had received Pell Grants.


  • Parent PLUS loan borrowers and current college students will also be eligible for relief using the same $125,000/$250,000 income guidelines. Dependent college students will use their parents’ income. Loans taken out after June 30, 2022, are not eligible for a reduction.


  • Most people will need to complete a simple application form to receive forgiveness, but roughly 8 million current loan holders whose income data is already on file with the US Department of Education won’t need to apply. The application form and process are still in development but are promised to be ready by the time loan payments resume in January 2023.


  • The administration is also proposing significant changes to income-driven repayment, which calculate monthly payments at 10% to as much as 20% of discretionary income. The proposal would limit monthly payments to 5% of discretionary income, cutting most monthly payments in half. These changes will need to be posted in the Federal Register and be open to public comment for 30 days. The changes could be in place when payments resume.



How do these changes impact members who want to take advantage of the PSLF waiver opportunity but who have federal loan balances that would be eliminated by the proposed lump-sum forgiveness? It’s your choice. If you’re anxious about waiting until the application process rolls out, you could still complete the required steps to secure full balance forgiveness before the waiver expires on Halloween. If the Administration’s relief plan won’t completely eliminate your debt, then you could follow the appropriate steps to qualify under the waiver, and then apply for the additional relief in January.

Does it sound a bit confusing? As an MTA member, you’re eligible for free student loan webinars and one-on-one counseling with Cambridge Credit Counseling. The next webinar, featuring plenty of live Q and A, is scheduled for September 14 at 4:30 p.m. If you haven’t yet discovered how the waiver could eliminate your loan balances or get you back on track for forgiveness, you need to attend because the waiver period expires on 10/31/22. This includes those of you who won’t have made 120 payments by that date. You can also contact Cambridge Credit Counseling representatives Todd Friedhaber ( or Martin Lynch ( to set up an appointment to discuss your options.

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