New Developments for Student Loan Forgiveness

As you may have heard in the news, there are new developments for student loan forgiveness. This is a fast-moving program change and we do not have final guidelines on the implementation of the program. Nonetheless, we wanted to get you the information we have so far, and subscribe below to receive updates as we learn more. This is just one piece of your financial plan, please do not hesitate to contact us to see how much you can save and how it can benefit you.

The average student loan borrower could save approximately $12,149 under this new program

The average debt per borrower for the 2019-2020 school year, the most recent year data is available, was $28,400, according to the College Board. Based on that, a 10-year loan term with a 4% fixed interest rate, the total lifetime costs of your student loans would be $34,504 paid over 10 years, and you’d pay $288 per month.

However, after accounting for $10,000 in loan forgiveness, your balance will be $18,400. On a 10-year loan term with a 4% fixed interest rate, the total lifetime costs of your student loans would be $22,355 paid over 10 years, and you’d pay $186 per month. That’s $102 less per month, and $12,149 less over the life of the loan.

Do you want to know how much you can save by taking advantage of this program? Click here to schedule a call with our expert advisors.

How do I apply for student loan forgiveness?

You may be eligible to receive the relief automatically due to relevant income data available to the U.S. Department of Education. If the Department does not have your income data, an application will be made available by early October 2022.

ACTION ITEM: If you would like to be notified when the application is open, please sign up at the Department of Education subscription page

There are 8 million people who will not need to apply and will receive the relief automatically though if you are not sure, you should still file the application once it is released. Once a borrower completes the application, they can expect relief within 4-6 weeks. The deadline to apply is December 31, 2023.

ACTION ITEM: Borrowers are advised to apply for forgiveness before November 15, 2022.

How much student loan debt will be forgiven?

Borrowers who are earning less than $125,000 (for individuals) or $250,000 (for married couples/heads of households) are eligible for up to $10,000 in loan forgiveness. Pell Grant recipients meeting the same income requirements above are eligible for up to $20,000 in forgiveness.

What does “up to $20,000” or “up to $10,000” mean?

Your relief is capped at the amount of your outstanding debt. For example, if you owe $6,000 remaining on your loans, you will only receive $6,000 in forgiveness. If you owe $12,000 remaining on your loans, you will receive $10,000 in forgiveness and still owe $2,000 on your loans.

I’ve heard that credit card debt forgiveness is taxable, will student loan debt forgiveness be taxable to me?

Congress eliminated federal taxes on student loan forgiveness through 2025. The current guidelines are that student loan forgiveness under this program will not be taxable to you. However, a handful of states that have not yet aligned their laws with this Act could still tax the amount of student debt forgiven unless they act to amend their laws and affirmatively exclude this debt.

What types of loans qualify for student loan forgiveness?

Forgiveness of federal student loan debt is only applicable for Department of Education loans. If you have private loans, you are not eligible for this relief.

ACTION ITEM: Here is a list of loan servicers that qualify

Do parent PLUS Loans qualify for cancellation?

Yes, provided the income limits are met. Any private loans taken out by parents to pay their child’s college education are not eligible.

I have more than $10,000 in student loan debt. Will my monthly payment be adjusted after cancellation?

It depends. Borrowers who are already in an income-driven repayment plan generally won’t see their monthly payment change because their payment is based on their discretionary income and household size, not their outstanding loan balance. By contrast, borrowers who are in a fixed payment plan should have their monthly payment recalculated by their loan servicer because their outstanding balance will be lower after loan cancellation, which should result in a lower monthly payment.

I made monthly payments during the payment pause. Can I still qualify?

According to the Department of Education, borrowers who continued to make payments on their federal student loans after March 13, 2020 will still qualify for loan cancellation (assuming they meet the income guidelines). Borrowers can request a refund by calling their loan servicer directly.

What else should I know?

Student loan debt for both undergraduate and graduate education qualifies for forgiveness if your loans are held by the Department of Education.

When are student loan payments resuming?

Student loan payments are paused through December 31, 2022. Current guidance is this is the last and final extension for the student loan repayment pause. Student loan payments will resume in January 2023.

Borrowers are advised to apply for forgiveness before November 15, 2022, to receive relief before the payment pause expires on December 31, 2022.

Public Service Loan Forgiveness (PSLF) Program

In addition, borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local government may be eligible to have all their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. This is because of time-limited changes that waive certain eligibility criteria in the PSLF program. These temporary changes expire on October 31, 2022. For more information on eligibility and requirements, go to


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We can show you how much you will save in student loan interest and how savings, if invested properly, can grow into a larger nest egg. Give us a call at (410) 823-5442 or

Chesapeake Financial Advisors is a fee-only financial planning, investment advisory, and tax planning firm with offices in Towson, Columbia, Frederick, and Chevy Chase Maryland.

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