Student Loans Forgiveness: How Much Debt Will Be Forgiven And Does It Matter To You?

May 14, 2023

It seems like there’s always something happening these days! Last week, the news was the Inflation Reduction Act (more to come on that soon) and its student loan forgiveness this week.

As you know, President Biden signed an executive order forgiving a certain amount of student loans for federal borrowers, but the action did more than that. To determine if this affects you or someone you know, here is how you can know if you qualify.

If you believe that you or someone you know may qualify, please go to this link -

Type – are my loans eligible?

The first step to knowing if you qualify is where your loan is held. You are eligible if your loans originated with and are still federal loans. If your loans are private, you are not eligible. Your service provider’s website should have information on if you qualify or not.

Income – are there income limits?

The second test for eligibility is income. The Income tests are as follows:

Married Filing Joint/HoH - $250,000

Single/MFS - $125,000

You may qualify if you were beneath those limits for 2020/2021. The key here is that these two years will be the most likely years to be used, as this was done under pandemic emergency authorizations.

Forgiveness – how much of my loan will be forgiven?

If you meet these requirements, you may be eligible for the following:

$10,000 in student loan forgiveness.

An additional $10,000 in student loan forgiveness if you received a Pell Grant.

Pause – is the repayment pause stopping?

One final loan repayment pause has been enacted as part of the forgiveness. Loan payments are paused until 12/31/2022 and will resume next year.

Taxes – how will forgiveness impact my taxes?

This forgiveness will most likely be tax-free at the federal level. However, there is a chance that your state may tax you. If your state doesn’t pass a law or update its statute to include this as nontaxable income, you may owe taxes at the end of the year.

Refunds – I just paid off my loans; what now?

Did you pay down your loan in the last two years? As part of the CARES Act, you may be eligible to request a refund of your payment and then apply for forgiveness. This part may be touchy because the announcement could be finalized that it is based on your balance at the date of the action, but there’s a chance that you could request the refund and turn around to have the balance forgiven! I would go ahead and call your servicer to see what you need to do to get ready to accomplish this.

Worst case scenario, you get the refund, it’s not allowed, and then you have to pay that back.

Additional Items:

In addition to the loan forgiveness, a few additional items have been added to the order. Here is a brief summary of each item.

  • Discretionary Income – the maximum payment required was reduced from 10% of discretionary income to 5%.
  • Non-discretionary Income – at the same time, nondiscretionary income was updated to state that anyone making less than 225% of the federal poverty line will not have to make payments.
  • New Forgiveness – if new loans are less than $12,000, they will be forgiven after ten years in the future.
  • Public Service Loan Forgiveness – some borrowers may not have been given credit for service. Not sure how this will work, but there are notes that they will fix this.


In conclusion, this is a substantial action that may have an effect on yourself, your family, your employees, or someone you know. This action forgives a substantial amount of debt, but hopefully, it will be revisited in the future legislatively to address the rising costs of college.

If you have any questions, please feel free to reach out, and I have the White House fact sheet if you need it.

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