INSIGHTi
The Administration’s Newly Announced
Student Loan Debt Cancellation Policy
Updated September 12, 2022
On August 24, 2022, invoking the HEROES Act of 2003, the U.S. Department of Education (ED)
announced a new student loan cancellation policy “to address the financial harms of the pandemic for
low- and middle-income borrowers” that is to make available to millions of federal student loan
borrowers up to $20,000 of loan cancellation benefits per borrower. ED is referring to this action as “one-
time student loan debt relief.” This action represents a departure from other types of student loan debt
relief, which historically have been available to borrowers on a more targeted basis and typically provide
relief to individuals for fulfilling employment requirements, for repaying their loans according to an
income-driven repayment plan, or following borrower hardships (e.g., total and permanent disability).
These programs, to date, have provided relief to hundreds of thousands of borrowers, although they could
ultimately provide relief to more. The Administration’s new policy is broader in scope and is to be
available to tens of millions of borrowers based on limited eligibility criteria. This Insight summarizes the
recently announced student loan cancellation policy.
The One-Time Student Loan Debt Relief Policy
Federal student loan debt exceeds $1.6 trillion and is owed by approximately 45 million borrowers. On
August 24, 2022, ED announced a one-time student loan debt relief policy that it estimates will provide
some amount of loan cancellation to most borrowers.
The administration plans to cancel the following:
up to $10,000 in student loans for borrowers whose annual income in 2020 or 2021 was
less than $125,000 (for individuals or married borrowers who file their federal income
taxes separately), or $250,000 (for married couples filing jointly or heads of households);
current dependent students will be eligible for cancellation based on parental income; and
an additional $10,000, for a total of up to $20,000, in student loans for borrowers who
meet the above criteria and received at least one Pell Grant in any amount at any point.
A borrower’s cancellation benefit is to be capped at the amount of their outstanding debt. Thus, if an
individual is eligible for $20,000 in cancellation benefits but has an outstanding balance of $15,000, they
would receive $15,000 in cancellation benefits.
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Cancellation benefits are to be available for ED-held loans and defaulted Federal Family Education Loan
(FFEL) program loans held by a guaranty agency (GA). ED-held loans include those loans made under
the Direct Loan program and those made under the FFEL program or the Perkins Loan program that have
been transferred to ED. For the Direct Loan and FFEL programs, eligible ED-held loans include
Subsidized Loans, Unsubsidized Loans, PLUS Loans made to graduate students or parents of dependent
undergraduate students, and Consolidation Loans. Loans must have been disbursed on or before June 30,
2022, except that for Consolidation Loans only the underlying loans that were repaid by the
Consolidation Loan must have been disbursed on or before June 30, 2022. Thus, borrowers may
consolidate their non ED-held federal student loans into a Direct Consolidation Loan to become eligible
for the cancellation benefit. Borrowers with qualifying loans in any status, including in school, in
repayment, in grace, or in default may qualify for the loan cancellation benefit so long as they meet the
income requirements.
If a borrower has multiple qualifying loans, ED has developed the order in which it would apply the
cancellation benefit. In general, benefits are to be applied first to defaulted loans and then to non-
defaulted loans, with ED also making allowances for whether a borrower has multiple defaulted or non-
defaulted loans and taking into consideration the specific program type (e.g., Direct Loan program, FFEL
program) under which the loans were made. If a borrower has multiple loans within a program type, ED
would apply the benefits considering the loans’ interest rates (e.g., apply benefits to higher interest rate
loans first), subsidy status (e.g., apply benefits to unsubsidized loans first), date of disbursement, and
outstanding balance.
For borrowers with remaining loan balances after the cancellation benefit is applied, ED has stated it will
recalculate their monthly payment based on their new balance, which may reduce such borrowers’
monthly payments.
How Borrowers May Receive Benefits
Qualifying borrowers may receive the one-time student loan debt relief benefit in one of two ways. First,
ED estimates that nearly 8 million borrowers are eligible to receive the benefit automatically, based on
relevant income data already available to ED. Such borrowers need not take any action and are to be
informed by ED of the debt relief they are to receive. For borrowers for whom ED does not have relevant
income data, ED has indicated that an online application will be available “by early October” and a paper
version will be available at a future date. ED has stated that once a borrower completes an application,
they can “expect relief within 4-6 weeks.” Borrowers must submit the application by December 31, 2023.
Potential Impacts on Borrowers
In announcing the new student loan cancellation policy, the Administration estimated that
up to 43 million borrowers would receive some relief under the policy;
about 27 million student loan borrowers will be eligible to receive up to $20,000 in
cancellation benefits; and
about 20 million borrowers would have the full balance of their loans cancelled.
In addition, the Administration provided an analysis of characteristics of borrowers who may receive
relief under the policy, which included the following:
of eligible borrowers, 21% are 25 years old and under, 44% are ages 26-39, and more
than one-third are ages 40 and up, including 5% who are senior citizens;
only individuals or households in the bottom 95% of incomes in the United States (i.e.,
not in the top 5% of incomes) will receive loan cancellation benefits;
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87% of loan cancellation benefits (in terms of dollar amount cancelled) will go to
individuals earning less than $75,000 annually.
Author Information
Alexandra Hegji
Analyst in Social Policy
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
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