Recently the Biden administration has forgiven $1.2 billion student loans under the SAVE plan. There are still a lot of questions as to where and how to apply. In this blog, we try to decode them.
- 1. What is Student Loan Forgiveness?
- 2. Who is Eligible for the Student Loan Forgiveness?
- 3. Where to Apply for the Student Loan Forgiveness?
- 4. Are Private Student Loans Eligible Under the SAVE Plan?
- 5. What Happens After Your Student Loan is Forgiven?
- 6. When My Student Loan is Forgiven, Do I Still Have To Pay Income Taxes?
- The state-wise breakdown of borrowers approved for forgiveness under SAVE is as follows:
What is Student Loan Forgiveness
Student loan forgiveness is a program by the Federal Government in the United States aimed at providing relaxation to loan borrowers from the obligation to repay part or all of their federal student loan. These borrowers have taken loans to fund their post-secondary education.
Who is Eligible for the Student Loan Forgiveness
The borrowers must first be enrolled in the Department of Education’s Income-Driven Repayment Plan called SAVE – The Saving on a Valuable Education. A person can sign up at www.studentaid.gov website. President Biden announced the new IDR Plan SAVE on June 30, 2023, in response to the Supreme Court Judgement that had halted his previous student loan forgiveness plan.
The following are the criteria to qualify under the SAVE Plan
- Those who took out federal student loans worth $12,000 or less and have been paying for the last 10 years or simply put after 120 qualifying payments.
- Only federal loan directs qualify for loan forgiveness which means the eligibility is limited to only certain types of borrowers who are in military service, public service, and educational professionals. Therefore, the private loans are not qualified.
- Students who feel that their educational institutions have misled them or engaged in misconduct in violation of certain laws can also apply for the forgiveness under the category of borrower’s defense.
Most of the people who qualify are those who qualify for the Pell Grants – A need-based federal financial aid and a subsidy by the US Department of Education to help low-income students pay their college and other educational expenses.
Beginning this month, the Department of Education is sending letters and emails to qualified borrowers, letting them know that their loans have been forgiven.
Where to Apply
Borrowers who qualify can apply online if they haven’t received an email or letter from the Department of Education through the following website: studentaid.gov/forms-library under the section “Loan Forgiveness and Discharge”.
Are Private Student Loans Eligible Under the SAVE Plan?
The student loan forgiveness by the Department of Education is applicable only to the borrowers who have taken federal loans which means these loans are owned by the US Department of Education and the private loans are not eligible.
Although federal loans constitute nearly 92% of the $1.7 trillion student debt, 7.71% of student loans are private loans. While private loans are not being covered under the forgiveness, there are some steps that can be taken to decrease the debt burden including loan restructuring and refinancing the loan for a lower interest rate.
What Happens After Your Student Loan is Forgiven
If you qualify for student loan forgiveness, you will receive an email or letter confirming that you are no longer required to make the payment. However, in some cases, a person will get a refund depending on the program that the person applied for.
When My Student Loan is Forgiven, Do I Still Have To Pay Income Taxes?
According to the American Rescue Plan Act of 2021, borrowers who are qualified for the student loan forgiveness have been exempted from taxation. The exemption is only applicable to the loans forgiven between January 1, 2021, and December 31, 2025.
The state-wise breakdown of borrowers approved for forgiveness under SAVE is as follows:
| Borrowers Identified for Early SAVE Forgiveness by Location | ||
| State | Borrower Count | Amount Forgiven (in millions) |
| Alabama | 2,550 | $20.8 |
| Alaska | 190 | $1.4 |
| Arizona | 3,990 | $33.0 |
| Arkansas | 1,190 | $8.7 |
| California | 13,580 | $114.8 |
| Colorado | 2,530 | $19.8 |
| Connecticut | 1,600 | $13.7 |
| Delaware | 650 | $5.3 |
| District of Columbia | 350 | $2.9 |
| Florida | 12,790 | $105.4 |
| Georgia | 6,050 | $49.7 |
| Hawaii | 280 | $1.9 |
| Idaho | 1,130 | $9.2 |
| Illinois | 5,560 | $43.8 |
| Indiana | 3,330 | $26.0 |
| Iowa | 2,120 | $17.3 |
| Kansas | 1,270 | $9.9 |
| Kentucky | 2,110 | $16.1 |
| Louisiana | 2,160 | $16.3 |
| Maine | 700 | $5.3 |
| Maryland | 2,680 | $22.7 |
| Massachusetts | 2,490 | $19.5 |
| Michigan | 6,040 | $47.0 |
| Minnesota | 2,060 | $14.5 |
| Mississippi | 1,790 | $13.3 |
| Missouri | 2,780 | $22.4 |
| Montana | 300 | $2.2 |
| Nebraska | 750 | $5.3 |
| Nevada | 1,650 | $13.9 |
| New Hampshire | 490 | $3.6 |
| New Jersey | 4,180 | $35.3 |
| New Mexico | 860 | $6.8 |
| New York | 8,190 | $63.4 |
| North Carolina | 4,170 | $33.3 |
| North Dakota | 220 | $1.6 |
| Ohio | 7,540 | $60.0 |
| Oklahoma | 1,690 | $12.9 |
| Oregon | 2,220 | $17.4 |
| Pennsylvania | 5,600 | $45.1 |
| Puerto Rico | 1,060 | $6.1 |
| Rhode Island | 450 | $3.4 |
| South Carolina | 2,520 | $20.6 |
| South Dakota | 270 | $1.9 |
| Tennessee | 3,340 | $25.7 |
| Texas | 14,510 | $116.6 |
| Utah | 850 | $5.8 |
| Vermont | 190 | $1.3 |
| Virginia | 3,040 | $24.6 |
| Washington | 2,630 | $20.1 |
| West Virginia | 1,070 | $8.8 |
| Wisconsin | 1,990 | $13.8 |
| Wyoming | 150 | $1.0 |
| All Other Locations | 990 | $7.4 |
| Total | 152,880 | $1,218.1 |
| Data as of Mid-February 2024 | ||
| The sum of individual values may not equal the total due to rounding. | ||
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