Is Biden’s Student Loan Forgiveness Automatic? (2024)

If you’ve been paying back student loans for years, or even decades, you may have questions about loan forgiveness. Will your student loans be forgiven? Is student loan forgiveness automatic? And who qualifies for student loan forgiveness?

Is Student Loan Forgiveness Automatic?

For borrowers who qualify, student loan forgiveness may be automatic. U.S. News & World Report stated that nearly 8 million borrowers may qualify for automatic forgiveness. The Education Department may already have their income information on file if they have an income-driven repayment plan or if the information on their Free Application for Federal Student Aid (FAFSA) is recent and up to date.

However, it’s still a good idea to fill out the application at StudentAid.gov when it becomes available. Because student loan forgiveness has been blocked for now, the Department of Education is not accepting new applications. You can subscribe for updates from the application page for now, so you’ll be notified when you’re able to apply. If you’ve already applied, though, you will not have to apply again.

Will the Federal Government Settle Student Loans?

The Federal Government might pay off as much as $20,000 in student loan debt per borrower. However, student loan forgiveness is stalled right now due to questions about its legality, which the Supreme Court will decide.

How Do I Know If My Student Loans Will Be Forgiven?

Right now, with the Supreme Court still ruling on President Joe Biden’s student loan forgiveness, there’s no way to be certain your student loans will be forgiven. At this point, you may want to hope for the best while preparing for the worst.

That could mean paying down higher interest credit card debt now so you are in a better position if student loan payments resume, or setting aside student loan payment money now so that it is a natural part of your budget come August 2023.

What If I Don’t Receive Forgiveness Automatically?

If you are not sure if you will receive automatic forgiveness, you should apply as soon as the portal reopens. Twenty-six million borrowers applied for forgiveness in October and November of last year, before the Education Department closed applications.

Now, the application page at StudentAid.gov reads: “Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.” If you have already applied, the site says, your application will be held. You won’t need to re-apply if the Supreme Court rules in favor of Biden’s student loan forgiveness program.

Will I Get a Refund from Student Loan Forgiveness?

If you continued paying your federal student loans during the forbearance period and now owe less than $10,000, you will not receive an automatic refund to bring your forgiveness amount up to $10,000. Only existing student loan debt will be forgiven, up to the $10,000 or $20,000 cap per borrower.

However, you can speak to your loan servicer and request a refund for payments made since March 13, 2020. Keep in mind that if the Supreme Court overturns student loan forgiveness, you will be responsible for making those payments again.

Will I Have to Pay Taxes on My Student Loan Debt Relief?

Debt relief, including credit card and personal loan debt, is typically factored into your taxable income when you file your federal income taxes. However, the Biden Administration allows canceled student loan debt to be tax-free through 2025. This applies to student loans already forgiven and those that might be forgiven if Biden’s plan passes Supreme Court scrutiny.

State Taxes

However, some states may tax forgiven student loans as income. The states that currently count forgiven student loan debt as taxable income are Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin.

If you live in one of these states, you may want to speak with a tax professional now to plan ahead for the 2024 tax season. You may be able to increase your withholding taxes with your employer or start setting aside money now to pay your taxes in 2024 if your student loans are forgiven.

The Beginning of Student Loan Relief

Student loan relief is a complicated subject. To understand student loan forgiveness and whether or not you qualify, it’s helpful to take a look at the history, present and potential future of the federal student loan forgiveness plan.

On March 13, 2020, the U.S. Department of Education and the Federal government paused all federal student loan payments and set interest rates to zero on all federal student loans. Although Donald Trump was President at the time of the ruling, federal student loan forbearance set the stage for Biden’s loan forgiveness programs.

Student Loans Forgiven

The Education Department proposed up to $20,000 in loan forgiveness to Pell Grant recipients and up to $10,000 to non-Pell grant recipients with an income of less than $125,000, or $250,000 for married couples.

The Education Department also made adjustments to the Public Service Student Loan Forgiveness (PSLF) program, forgiving more than $10 billion in loans for more than 175,000 borrowers.

Do Your Student Loans Qualify for Forgiveness?

It’s important to realize that if you have privately held student loans, none of the federal loan forgiveness programs apply to you. Private loans did not qualify for forbearance and do not qualify for loan forgiveness under Biden’s programs.

If you aren’t sure what kind of loans you have, you’ll want to log in to StudentAid.gov and view your loans. Loans that qualify for forgiveness include:

• Direct loans
• Parent Plus loans

In recent legislation, Perkins loans were dropped from the list of loans that qualify for forgiveness, as were privately held Federal Family Education Loans.

An Extended Pause on Student Loan Payments

Even as other pandemic-related relief came to a close, the student loan pause continued through the Dec. 31, 2022.

The student loan forgiveness program came under fire from several states. The Supreme Court has to determine if Biden’s student loan forgiveness policy is constitutional and if the president has the legal right to forgive student loans.

As a result of the court hearings, the government and the Education Department extended forbearance until either 60 days after a ruling is made, or 60 days after June 30, 2023, if the Supreme Court does not make a ruling by that time.

A Fresh Start for Student Loan Borrowers

In April 2023, President Biden announced a “Fresh Start” program for student loan borrowers, placing $34 billion worth of delinquent or defaulted student loan accounts into “current” status. The New York Federal Reserve’s Q4 2022 Household Debt and Credit report showed that the Fresh Start program will leave less than 1% of all student loan debt as delinquent or in default.

Bottom Line

The student loan forgiveness landscape continues to change, making it challenging for borrowers to keep up. The good news is that you will have 60 days notice to prepare if student loan payments resume. There is also still a possibility that student loan debt will be forgiven for more than 26 million applicants, as well as those who did not submit their paperwork before applications closed.

Information is accurate as of April 13, 2023.