Biden Forgives $10,000 (or $20,000) for Student Loan Borrowers; Extends Payment Suspension

The payment suspension for most federal student loans will now last longer and many borrowers will get loan forgiveness.

By , Attorney · University of Denver Sturm College of Law

Legal Update: On June 30, 2023, the U.S. Supreme Court struck down President Biden's debt cancellation plan described below. In the case of Biden v Nebraska, six Republican-led states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina) argued that Congress should have approved any student loan debt cancellation plan. They also claimed that the Biden administration and the U.S. Department of Education abused their emergency authority under the 2003 Higher Education Relief Opportunities for Students (HEROES) Act, which the administration used to justify the plan. In a 6-3 decision, the court found that the HEROES Act didn't grant the authority for the debt relief program.

So, student loan interest resumed accruing September 1, 2023, and payments became due beginning October 2023. (In exchange for a raised debt ceiling, the Biden administration agreed not to extend the ongoing payment pause longer.)

After the U.S. Supreme Court struck down the debt cancellation plan, the administration introduced a 12-month "on-ramp" repayment program for federal student loans. Beginning October 1, 2023, and for a year after that, the Education Department won't report borrowers who miss payments to the credit bureaus, consider them delinquent, place them in default, or refer them to debt collection agencies. But interest will accrue.

In addition, the Biden Administration announced that, in February 2024, it would start canceling federal student loan debts for anyone who initially borrowed $12,000 or less and has been in repayment for at least 10 years if they first enroll in the SAVE income-based repayment plan. The timeframe for loan forgiveness increases by one year with each additional $1,000 of debt. So, for example, a student who took out $14,000 in loans would have their debts canceled if they've been making payments for 12 years. It doesn't matter what repayment plan or plans you previously had, so long as you were actively repaying your loans and are enrolled in the SAVE plan. In the future, the Department of Education will continue to identify and forgive the loans of eligible borrowers on an ongoing basis.

However, on March 28, 2024, eleven Republican-led states filed a federal lawsuit arguing that President Biden overstepped his authority in creating the SAVE Plan.

On August 24, 2022, the Biden Administration announced that $10,000 in federal student loan debt, or $20,000 if you went to college on Pell Grants, would be canceled for those earning less than $125,000 per year (or households earning less than $250,000) in 2020 or 2021.

The administration also said the U.S. Department of Education will extend the suspension of most federal student loan payments through December 31, 2022. Payments were set to resume on September 1 after being on hold since the beginning of the COVID-19 pandemic. This is the seventh time the payment pause has been extended in the last two years.

And if you have undergraduate loans, you can cap your payments at 5% of your monthly income. The current income-driven repayment plans generally limit payments to 10% of a borrower's discretionary income.

Which Student Loans Does the Cancellation Cover?

If you have federal student loans held by the Department of Education issued on or before June 30, 2022, your outstanding balance can be reduced or fully canceled, depending on how much you owe. Again, $10,000 (or $20,000 if you went to college on Pell Grants) will be canceled if you earned less than $125,000 per year (or your household earned less than $250,000) in 2020 or 2021.

Borrowers with FFEL or Perkins loans not held by the Education Department can qualify for forgiveness only if they applied for consolidation before September 29, 2022.

The Department of Education has said 8 million borrowers might qualify automatically because relevant income data is already available to the Department. But others will have to apply.

Loan Forgiveness Applications

Borrowers must complete the application before November 15 to get relief before the payment pause ends on December 31.

Though, the Education Department will continue to process applications as they are received, even after the pause expires on December 31, 2022. You'll have until December 31, 2023 to apply for relief.

Can I Get a Refund for the Student Loan Payments I Made During the Suspension?

Most people who qualified for the suspension of student loan payments, which started in 2020, didn't make payments during the pause. But if you made payments during the suspension, you can get a refund on the payments you made since March 2020.

You'll automatically get a refund of payments you made during the payment pause if:

  • you successfully apply for and receive debt relief under this debt relief plan, and
  • your voluntary payments during the payment pause brought your balance below the maximum debt relief amount you're eligible to receive but didn't pay off your loan in full.

Here's an example of how the automatic refund process will work, according to the Department of Education. Say you qualify for $10,000 in debt cancellation. Your balance was $10,500 before March 13, 2020, and you paid $1,000 since then on your loans. Because your balance is $9,500 at the time of cancellation, you'll get a $500 refund.

If you're not eligible for an automatic refund, contact your loan servicer by December 31, 2023, to ask for your money back. If you get a refund, that amount will be added to your balance (or your account will be reopened if you've paid off the debt). Because it could take months for the cancellation to happen, you could have to make regular payments after the suspension ends on December 31, 2002, until the forgiveness comes through.

And if you consolidated your loan after March 13, 2020, you can't get a refund for any voluntary payments made before the consolidation.

Do I Have to Pay Taxes on Canceled Student Loans?

The American Rescue Plan Act exempts student debt cancellation from federal taxation until January 1, 2026. So, you won't owe federal taxes on forgiven amounts. But some states could tax you.

Which Student Loans Does the Payment Suspension Cover?

The suspension applies to Federal Direct Loans and Federal Family Education Loans (FFELs), but only FFELs that the U.S. Department of Education owns, not nondefaulted FFELs held by other entities. Borrowers with Perkins Loans held by entities other than the Department of Education and nondefaulted HEAL loans also aren't covered.

Private student loan borrowers don't get relief either. If you have private student loans, call your lender to see if any alternatives are available to help you out.

Eligible borrowers will have their payments automatically suspended without penalty or accrual of interest. Collection actions, wage garnishments, and Treasury offsets for defaulted federal student loans are also paused until 2023.

The Biden Administration Has Provided Billions in Student Loan Relief

The Department of Education, under President Biden's direction, has canceled billions of dollars in federal student loan debt.

In addition, the American Rescue Plan Act exempts student debt forgiveness from federal taxation until January 1, 2026, and covers Direct Loans, FFELs, and private student loans. (Forgiven amounts might be taxable in some states.)

Learn More

To get more information about the payment suspension and other available support for student loan borrowers, go to