Note: Since this article was published, several lawsuits have temporarily blocked President Biden’s student debt relief program. Please refer to this post for more information.

The Department of Education today announced the official launch of its application for one-time federal student loan forgiveness. The announcement follows a brief preliminary beta launch, during which the Education Department (ED) received more than eight million applications over the course of three days.

While the application is straightforward and should take less than five minutes to complete, most borrowers will still have questions about the application, the review process, and what this all means for them — and Candidly is here to help:

What is the process to submit an application?

The application can be completed and submitted at at any point from now until December 31, 2023. However, borrowers are advised to apply before November 15 if they want to receive their relief before federal student loan payments resume in January. 

The application is simple — borrowers are asked to provide only basic information, including name, social security number, date of birth, phone number, and email address. 

Borrowers must also digitally sign an acknowledgement that states that they agree to share proof of income if the Education Department requests it, that they meet the income requirements, and that they’re completing the application for themselves and not on behalf of another borrower. 

What happens after a borrower submits their application?

After a borrower completes the application — including sharing all required personal information, providing a digital signature, and confirming that the information they’ve provided is true and correct — they should receive an email from the Education Department confirming receipt of the application and that they will begin their review process. 

If the Education Department needs more information to process a borrower’s application, the borrower will receive an email after the processing period begins. If the borrower doesn’t receive an email requesting more information, no further action is needed from the borrower.

Borrowers will be notified once their eligibility has been confirmed and their application has been processed. Loan servicers will be notified and administer the appropriate amount of forgiveness directly to borrowers’ accounts. Servicers will then notify borrowers of their remaining debt balance and the amount they’ll be required to pay each month when payments resume in January, or confirm that the amount forgiven repays the borrower’s loans in full. 

Borrowers should expect to receive confirmation that their application has been processed and that their forgiveness has been administered within several weeks of submitting their application.

Who is eligible for forgiveness?

Borrowers are eligible for up to $10,000 in relief if they:

  • Earned less than $125,000 (if they filed their taxes individually) or less than $250,000 (if they filed their taxes jointly) in 2020 or 2021, or did not file federal income taxes in 2020 or 2021 because their income was less than the amount required to file 
  • Did not receive a Pell Grant during their undergraduate studies

Borrowers are eligible for up to $20,000 in relief if they:

  • Meet the income requirements for $10,000, but received at least one Pell Grant during their undergraduate studies

Borrowers aren’t eligible for any relief if they:

  • Earned more than $125,000 (if they filed their taxes individually) or $250,000 (if they filed their taxes jointly) in 2020 or 2021
  • Only have private student loans
  • Only have commercially held FFELP loans that were not consolidated on or before September 29, 2022

Are current students eligible?

Current undergraduate students with federal student loans can still qualify for forgiveness, but if the student is claimed as a dependent on their parent or guardian’s taxes, their parent or guardian’s income will ultimately be used to determine the dependent student’s eligibility.

However, dependent students should still submit an application for forgiveness using their own income information. The Education Department will then identify applicants who are classified as dependent students and send further instruction. 

What types of loans are eligible?

The following types of federal student loans are eligible for forgiveness, provided they were disbursed on or before June 30, 2022:

  • William D. Ford Federal Direct Loan (Direct Loan) Program loans, including subsidized, unsubsidized, and parent and graduate PLUS loans
  • Federal Family Education Loan (FFEL) Program loans held by ED or in default at a guaranty agency
  • Federal Perkins Loan Program loans held by ED
  • Consolidation loans resulting from ED-loans that were disbursed on or before June 30, 2022
  • Consolidation loans resulting from FFEL or Perkins loans not held by ED, as long as the borrower applied for consolidation before September 29, 2022
  • Loans in default, including ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, graduate PLUS; and Perkins loans held by ED

Are Parent PLUS loans eligible?

Parent PLUS loans are eligible for forgiveness, provided the parent borrower meets the other eligibility criteria. Parents with PLUS loans should submit their own application, separate from any application submitted by the child for whom the PLUS loan was borrowed. 

What if the amount of forgiveness a borrower is eligible for is greater than their remaining debt balance?

The amount forgiven is limited to the borrower’s outstanding federal student debt. Borrowers won’t receive any credit for the difference between their debt balance and the maximum amount forgiven.

However, there’s one major exception to this rule. If a borrower made voluntary payments during the payment suspension period (between March 13, 2020 and December 31, 2022) and their current debt balance is less than $10,000 or $20,000 (determined by the borrower’s Pell Grant status), they’ll be refunded for the difference between the payments they made during the suspension period and the maximum amount of relief they qualify for. Such refunds will be administered automatically after the borrower has applied for and received forgiveness.

  • Example: Sarah voluntarily paid $3,500 towards her federal student loans during the payment suspension period, bringing her remaining debt balance to $5,000. She did not receive any Pell Grants during college, so she qualifies for up to $10,000 in forgiveness. After she applies for relief and the remaining $5,000 balance has been forgiven, she’ll receive a refund for $3,500. 

Is this student loan forgiveness taxable?

Student loan forgiveness typically is usually treated as taxable income, but the American Rescue Plan Act of 2021 included a provision that relieves borrowers of their federal tax liability for forgiveness received between 2021 and 2025.

Most states have agreed to follow suit and allow the amount forgiven to be exempt from state income tax. However, several states have confirmed that they plan to enforce state income tax for the amount forgiven, including Indiana, Mississippi, and North Carolina.

If a borrower wants to opt out of receiving debt forgiveness to avoid state tax liability, or for any other reason, they should contact their federal student loan servicer by phone to make this request. 

How can borrowers avoid student loan forgiveness scams?

There are multiple recent reports of scams that offer borrowers fraudulent services or applications related to student loan forgiveness, usually with the aim of tricking victims into providing payment or sensitive personal and banking information. 

Borrowers should be suspicious of any phone call, email, text message, or other communication that:

  • Requests payment or share banking credentials in order to access the forgiveness application
  • Offers to complete the forgiveness application on the borrower’s behalf
  • Is from an unexpected sender, especially an untraceable phone number or an email address from a domain other than .gov or their student loan servicer’s domain 

Read more: Help Employees Avoid Student Loan Scams

How will ongoing legal action impact student loan forgiveness?

Six GOP states and multiple conservative advocacy groups, lawyers, and lawmakers have filed lawsuits aiming to block student loan forgiveness on the grounds that the Biden administration violated federal procedure by failing to seek the public’s approval of the program. Some of these suits have already been ruled against or dismissed, but many are still awaiting next steps.

It’s too soon to say what the ultimate impact of these ongoing lawsuits will be, but the fact that the Education Department did not delay the application’s launch is a good indication that it expects the administration’s legal power to prevail.