Student Loan Forgiveness is Here: Biden’s Plan Explained

Student loan debt is a major financial burden for millions of Americans, with outstanding student loan debt exceeding $1.7 trillion. In August 2022, President Joe Biden announced a plan to provide student loan forgiveness to address this growing crisis. Biden Loan Forgiveness plan aims to provide financial relief for many student loan borrowers while also stimulating the broader economy. 

Under Biden’s plan, individual borrowers who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will be eligible for up to $10,000 in federal student loan forgiveness. Recipients of Pell Grants can receive up to $20,000 in forgiveness. This broad cancellation of student loan debt aims to address the surging costs of college that have saddled generations of students with massive debt before they even enter the full-time workforce.

Advocates say Biden’s plan is a positive step in tackling the $1.7 trillion student debt crisis. They argue that wide-scale loan forgiveness can provide immediate financial relief for millions struggling under the burden of student loans. Critics counter that it fails to address the root causes of the rising costs of higher education. Some economists also warn large-scale loan forgiveness will worsen inflation.

Eligibility Requirements

President Biden’s student Biden Loan Forgiveness plan focuses on providing relief to middle and lower-income borrowers. The eligibility requirements are:

  • The borrower must have federal student loans that are not in default. This includes Direct Loans as well as PLUS loans taken out by graduate students and parents. Private student loans are not eligible.
  • The borrower’s annual income must be under the income caps based on their family size. For individuals, the cap is $125,000. For married couples or heads of households, the cap is $250,000. 
  • The borrower cannot be enrolled in school currently. Only loans taken out prior to July 2022 are eligible.
  • The borrower must apply for forgiveness. An application process will open in early October 2022 for borrowers to submit income information and self-certify their eligibility.

The income thresholds aim to provide relief to middle and lower-income borrowers who are more likely to struggle with student loan payments. People who earn higher incomes are excluded from forgiveness under the belief they can manage the payments. 

Critics argue the income caps are too broad and high-income professionals like doctors and lawyers will benefit. However, the White House says nearly 90% of relief will go to those earning under $75,000 per year. The income caps attempt to balance providing wide relief to borrowers while excluding very high earners.

Amount of Forgiveness 

President Biden loan forgiveness plan will provide up to $10,000 in debt cancellation for individual borrowers who earn less than $125,000 per year and up to $20,000 for Pell Grant recipients. This applies to federal student loans only. The amount forgiven will depend on the borrower’s income as follows:

  • Individuals earning under $125,000 annually will receive up to $10,000 in loan forgiveness.
  • Couples filing taxes jointly and earning under $250,000 annually will receive up to $10,000 in loan forgiveness per partner.  
  • Pell Grant recipients meeting the income requirements will receive up to $20,000 in loan forgiveness.
  • For borrowers who still have remaining debt after cancellation, monthly loan payments will be capped at 5% of discretionary income.

The loan forgiveness is aimed at providing meaningful relief to lower and middle-income borrowers who are most burdened by student debt. Over 43 million federal student loan borrowers are eligible to receive relief under this plan. The Department of Education estimates that 20 million borrowers could have their remaining balances completely eliminated through this forgiveness. However, for many, the $10,000 or $20,000 will only cover a portion of their total student debt.

Application Process  

The application process for Biden’s student loan forgiveness program opened in early October 2022. The application can be completed online at [student. gov](student aid. gov) and takes approximately 5-10 minutes to complete.  

To apply, you will need to provide some basic personal information including:

  • Full name
  • Date of birth 
  • Social Security number
  • Phone number
  • Email address

You do not need to log in or provide any documents. The application simply requires you to check a box confirming you are eligible under the income requirements. 

The deadline to apply is December 31, 2023. However, borrowers are recommended to apply before November 15, 2022, to get forgiveness before payments resume in January 2023 after the pandemic pause.

Once the application is submitted, it will be processed within 4-6 weeks. You can expect to receive confirmation of your approval via email. If you provided income information that requires further verification, it may take longer. 

The key is to apply as soon as possible, providing accurate information, to ensure your loans get relieved before payments restart. Check the Federal Student Aid website for the latest updates on the forgiveness program and application process.


President Biden’s student loan forgiveness plan has faced criticism from several angles. 

Concerns about cost

One of the main criticisms of the plan is its high price tag. The Congressional Budget Office estimates the total cost will be around $400 billion over the next 30 years. Opponents argue this is an unnecessary expense that will increase the national debt and budget deficit. They believe there are better uses for these funds than forgiving loans for a segment of the population.

Concerns about fairness 

Another common criticism is that loan forgiveness is unfair to those who never took out student loans or already paid them off. Only federal student loan borrowers making under $125,000 a year (or $250,000 for married couples) will receive relief. This excludes borrowers with privately held loans. Critics argue it is unequal to forgive debt for some Americans but not others.

Concerns about incentives

Some argue the forgiveness plan could incentivize irresponsible borrowing practices in the future. If borrowers think their debt may be canceled down the road, they may be more willing to take out larger loans. There is concern that loan forgiveness could remove borrowers’ accountability. Opponents believe borrowers who voluntarily took out loans should be responsible for repayment.


President Biden’s student loan forgiveness plan has garnered support from several groups and individuals. 

Congressional Democrats

Many Democrats in Congress praised the plan and have long pushed for some form of broad student debt cancellation. They argue that student debt is crushing millions of Americans and hampering economic growth. Forgiveness would allow borrowers to invest in homes, small businesses, and their local economies. It would also help address racial economic inequities since Black borrowers hold a disproportionate amount of student debt.

Consumer Advocates 

Consumer advocacy groups applauded the plan as a positive step in easing the burden of student debt. Many have argued for years that the cost of college has risen beyond what borrowers can reasonably repay. They say loan forgiveness would provide relief to millions struggling financially. Some advocates counter criticisms that loan forgiveness is unfair to those without debt, arguing that the current debt crisis impacts everyone and forgiveness would benefit the broader economy.

Young Voters

Younger voters, a key constituency for Democrats, are strongly in favor of student debt forgiveness. Many are struggling under massive debt burdens or unable to achieve milestones like buying a house. Broad forgiveness would help energize a demographic that tends to have a lower turnout. Studies show loan cancellation substantially increases the probability younger borrowers will support Democratic candidates.

Labor Unions

Major labor unions endorsed the policy as one that would provide financial relief to working Americans. They argue student debt makes it harder for young people to secure housing, transportation, and basic necessities. This leads to delayed family formation, lower retirement savings, and overall reduced economic opportunities for borrowers.

Impact on the Economy

The student loan forgiveness program is likely to have a range of impacts on the economy. 

Effect on Inflation

There is debate among economists about whether the loan forgiveness program will contribute to inflation in the short term. Proponents argue that because loan payments have been paused since early 2020, canceling a portion of the debt will not provide a major new stimulus to the economy. However, critics say that by boosting consumer spending power, loan forgiveness could still feed inflation. Overall price increases could be mitigated if the Federal Reserve takes the debt relief program into account in monetary policy decisions. 

Consumer Spending 

With less student debt, borrowers are expected to increase spending on big-ticket items like cars and homes, as well as daily expenditures. This could provide a modest boost to consumer demand. However, some borrowers may choose to save the extra funds or pay down other debts rather than spend right away. The extent to which loan forgiveness stimulates consumer spending in the near term remains uncertain.

Housing Market

The housing market could see increased demand, as cancellation of student loans frees up borrowers’ income for mortgage and rent payments. This may lead to higher home prices. However, other factors like mortgage interest rates are major drivers of the housing market, so the magnitude of the effect of student debt relief remains unclear. Some analysts argue that rising rents and home prices could ultimately offset some of the benefits to borrowers.

Impact on Borrowers  

President Biden’s student Biden Loan Forgiveness plan will have a significant financial impact on both current and future student loan borrowers. 

For those who qualify, having $10,000 or $20,000 of their federal student loans forgiven could substantially improve their financial situation. This relief will free up money in monthly budgets that can now go towards other expenses like housing, transportation, food, or even savings. Some borrowers will even have their entire remaining balances wiped clean. This will enable them to escape student loan debt years earlier than anticipated.

Borrowers who have already paid off their student loans will not see direct benefits. However, having fewer Americans burdened with student debt could stimulate the broader economy in ways that indirectly help them too.

The plan will also impact the finances of future borrowers by capping undergraduate loan payments at 5% of monthly income. This lower percentage will make college more affordable for those taking out new loans. They may be able to manage college costs without taking on as much debt. 

While the forgiveness plan provides major relief to millions now, addressing the root causes of rising tuition and fees will be key to creating systemic change for future generations of students. But for now, those carrying the crushing weight of student loans finally have cause for optimism. Their financial futures just became a lot brighter thanks to President Biden’s historic plan.


The Biden Administration’s student loan forgiveness plan has sparked a great deal of debate. While canceling a set amount of debt per borrower provides immediate relief, some argue it does not address the root causes of rising student debt. There are several alternative proposals for tackling student debt in the long run:

  • Lower Interest Rates: Student loans tend to have higher interest rates than other forms of debt like mortgages and auto loans. Some proposals advocate reducing federal student loan interest rates to make debt more manageable. This could involve pegging rates to the 10-year Treasury rate or allowing rates to be refinanced.
  • Income-Based Repayment Reform: Existing income-driven repayment plans cap payments at a percentage of discretionary income and forgive remaining balances after 20-25 years. Reform ideas include shortening the forgiveness timeline, lowering the income percentage cap, and simplifying the number of IDR plans.
  • Free Community College: Studies show community college graduates save tens of thousands in student debt versus those who start at four-year institutions. Some plans call for making two years of community college free nationwide to reduce overall borrowing.
  • Loan Forgiveness for Public Service: There have been proposals to expand existing federal loan forgiveness programs for teachers, government employees, and workers in other public service fields as an incentive.
  • Cracking Down on For-Profit Institutions: For-profits tend to leave students with higher debt burdens compared to nonprofit colleges. Ideas include restricting federal aid dollars that can flow to poor-performing for-profit institutions.

While loan forgiveness provides immediate relief, addressing root causes may be needed to solve student debt challenges over the long term. The Biden plan has intensified the debate over the best path forward.


Summary of Main Points

President Biden’s student Biden Loan Forgiveness plan aims to provide relief to millions of borrowers suffering under the weight of student debt. The key aspects of the plan include:

  • Up to $10,000 in federal student loan forgiveness for borrowers making under $125,000 a year
  • Up to $20,000 in forgiveness for Pell grant recipients 
  • Forgiveness applies to federal loans only, not private loans
  • Borrowers must fill out an application for forgiveness 

The plan has faced both criticism and support. Critics argue it does not go far enough to address the $1.7 trillion student debt crisis and mainly benefits the middle and upper class. Supporters say it will provide real financial relief to working and middle-class borrowers. 

Final Thoughts

The impact of Biden’s loan forgiveness plan remains to be seen. It could provide an economic stimulus by freeing up household income. It could change the lives of borrowers by lifting the burden of debt. However, fundamental issues with college affordability and the student lending system remain. The debate reflects broader disagreements over government spending and the role of higher education. Time will tell if this historic action sets a precedent or remains a one-time policy action. But for millions of borrowers, student debt relief through Biden’s plan offers hope for a more financially secure future.

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