The White House Issues Student Loan Relief for Federal Borrowers

Aug 30, 2022

On Wednesday, August 24th, President Biden released a three-part delivery plan to cancel up to $20,000 for low-to middle-income federal borrowers. Currently, the national cumulative federal student loan debt is at $1.6 trillion, accounting for nearly 45 million borrowers. According to the Department of Education (ED), the average debt for an individual attaining an undergraduate degree is in $25,000. Since 1980, the cost of a four-year public college degree has nearly tripled. In addition, Pell Grants once covered nearly 80% of a four-year public college degree. Today, these grants cover only one-third of a four-year public degree and account for 60% of the federal borrower population. President Biden’s three-part plan aims to alleviate this lifelong burden for federal borrowers.

Providing targeted debt relief to borrowers with lower-to middle-incomes is one part of the Administration’s plan. It is estimated nearly 20 million borrowers within this targeted income group will have their full remaining balance canceled and 90% of relief will go to individuals making less than $75,000 per year. The ED estimates that eligible borrowers are as follows: 21% are 25 years and under, 44% are 26-39 years old, 33% are over 40 years old – of which 5% are senior citizens.

Those eligible for federal relief of $10,000 are individuals with an income of less than $125,000 and $250,000 for married couples. Recipients of Pell Grants are eligible for a total relief of $20,000. Students who are currently enrolled and have borrowed federal loans are eligible for relief. Dependents will be eligible for relief based on parental income.

Another strategy to alleviate federal student loan debt includes reforming the student loan system to ensure manageability for all borrowers. A proposed rule would change the Public Service Loan Forgiveness (PSLF) program for public servant borrowers. Public servants include those that work at a nonprofit, in the military, or in federal, state, tribal or local governments. The ED plans to authorize income-driven repayment plans that cap monthly payments based on the percentage of their discretionary income. The proposed rule would cut the amount borrowers will pay each month from 10% to 5% of discretionary income. Further, this rule would protect borrowers loan balance from interest accrual. You can find out more information regarding the changes on

Lastly, President Biden’s plan aims to protect future students and taxpayers by reducing the cost of college and enforcing transparency from institutions. To increase accountability and transparency of institutions from price-gauging prospective students, an annual watchlist of programs with the worst debt levels in the country will be released. The worst programs will be required to implement a poor institutional plan aimed to increase the value of programs.

ACA will continue to monitor the administration’s plan and will update you with information on how to apply as soon as the Administration releases the information. Applications will be available no later than December 31, 2022, which is the date of the final pause on federal student loan repayment. Note, some may automatically receive relief if their relevant income data is already available to the Department of Education. In addition, because of the American Rescue Plan, this debt relief will not be treated as taxable income for the federal income tax purposes. Borrowers can sign up to be notified when this information is available at

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