Understanding Student Loan Forgiveness

The forgiveness or restructuring of debt is one of the oldest governance mechanisms in the finance sector. From Israel’s years of Jubilee abolishing debts to George Washington’s Debtor’s Prison Relief Act of 1792 restructuring the American debt system and the more modern GI Bill, this mechanism has a long, but infrequent tradition. Now, the current administration has pulled this lever once again, and you may have strong feelings about whether or not that’s a good idea. Let’s focus on if and how you may benefit.

Targeted Debt Relief

The Executive Branch will use the power originally granted by the HEROES Act of 2003 to forgive $10,000 of Debt for borrowers who earn less than $125,000 a year as individuals or $250,000 for married couples. If a borrower’s student loans included Pell grants, this doubles to $20,000. For 20 million Americans, this will wipe out their remaining balance completely.

Loan System Overhaul

The Student Loan repayment system will also be restructured. Repayments will continue to be paused through December 31, 2022, after which the following changes will take effect:

  • Student Loan Payments will now be capped at 5% of the borrower’s income
  • No Borrower’s Monthly Interest will increase as long as they continue to make repayments
  • The remaining balance of loans under $12,000 will be forgiven after 10 years of repayment
  • Borrowers making less than $15/hr will not be required to make active monthly payments

This overhaul will streamline responsible repayment by remaining and future borrowers.

Protecting Borrowers from Future Abuse

The Department of Education has been directed to restructure the existing PSLF program that assists public servants like teachers and veterans, and the Department of Education has reinstated the enforcement unit of the Federal Office of Student aid in order to boost consumer confidence in the student loan program.

Even if your income is higher than the participating maximum, you may still benefit. You may have a family member entering the workforce on a starting salary who can receive this assistance, you might even see the cost of certain goods decrease as 43 million Americans see their purchasing power increase.

If the borrower is eligible for this program and has recently shared their income with the Office of Student Loans they may have automatically received this benefit. If not, an online process for manual application will be available sometime in early October with the White House encouraging borrowers to apply by Nov. 15, 2022.

If you have any questions about how this program works or how to go about managing student loans now that this program has been announced, please visit

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