INSIGHTi
The Biden Administration’s Newly
Announced Student Loan Debt Cancellation
Policy
Updated September 30, 2022
On August 24, 2022, invoking the HEROES Act of 2003, the U.S. Department of Education (ED)
announced a new “one-time student loan debt relief” 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. 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, but 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.
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 Biden 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);
borrowers enrolled in postsecondary education as dependent students between July 1,
2021, and June 30, 2022, 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.
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A borrower’s cancellation benefit is to be capped at the amount of their outstanding debt. However,
borrowers who made voluntary payments on their loans during the COVID-19 payment pause and qualify
for debt relief may automatically receive refunds of those payments in limited circumstances.
Cancellation benefits are to be available for ED-held loans and defaulted Federal Family Education Loan
(FFEL) program loans held by a guaranty agency. 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. Additionally, Direct
Consolidation Loans comprising any FFEL or Perkins Loan program loans not held by ED are eligible for
debt relief, so long as the borrower applied for consolidation before September 29, 2022. 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. Generally, 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) 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 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; however, borrowers may opt out of receiving the automatic debt relief. For
borrowers for whom ED does not have relevant income data, ED has indicated that an online application
will be available in October and that borrowers would not need to provide any supporting documentation.
ED has stated that, in most cases, once a borrower completes an application, they can “expect relief
within six weeks.” Borrowers must submit the application by December 31, 2023.
Potential Impacts on Borrowers
The Biden Administration estimates that
over 40 million borrowers are eligible for some amount of 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:
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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; and
87% of loan cancellation benefits (in terms of dollar amount cancelled) will go to
individuals earning less than $75,000 annually.
More recently, the Administration released estimates of the number of borrowers who may be eligible for
the one-time debt relief by state.
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
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
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