How Does Student Debt Relief Benefit Parents Your Questions, Answered

The Biden administration announced a one-time plan to cancel qualifying federal student debt, including the Parent PLUS loans that parents take out to help their children pay for college.

The broad outlines of the plan are clear: It provides for up to $10,000 in forgiveness for individual borrowers without Pell grants; borrowers with Pell grants, who tend to be lower income, are eligible for up to $10,000 in additional relief. Borrowers are eligible if their income is less than $125,000 for individuals or $250,000 for households.

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Less clear, to some parents, is exactly how the program might apply to them. In the days following the White House announcement, Barron’s received numerous reader questions on the subject. Below, we answer some of those queries with the help of two experts: Peter Granville, senior policy associate at the Century Foundation, and Jessica Thompson, vice president of the Institute for College Access & Success. (The Dept. of Education didn’t immediately respond to a request for comment.)

Some of the information below is preliminary, based on the experts’ best current understanding. The Dept. of Education will continue to issue guidance on how the program will be implemented, and we’ll follow up as more details become available.

When will student debt cancellation start—and how do I apply?

According to the government, nearly 8 million borrowers may be eligible to receive relief automatically, meaning they won’t have to apply because the Dept. of Education already has their income data on hand. In general, that is most likely to be true of those who’ve recently filed a FAFSA (Free Application for Federal Student Aid) form.

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If the department doesn’t have your information on file, you’ll be able to provide it through a simple online application; the administration says that form should be available by early October. In the meantime, make sure you have an account at studentaid.gov, and that all your information is up-to-date in the system. Sign up at the Department of Education subscription page to be notified when the application is open.

Borrowers who complete the application can expect relief within four to six weeks. Those who receive automatic relief should also see their balances change four to six weeks after the application becomes available, if not sooner.

I took out Parent PLUS loans for each of my children. Are all of the loans eligible for forgiveness?

The relief is tied to the borrower, not the recipient. So each parent borrower who meets the income criteria is eligible for up to $10,000 in total toward all their Parent PLUS loans outstanding.

I am still repaying loans I borrowed for my own education, as well as Parent PLUS loans I took out for my child. Is each eligible for forgiveness?

Yes, but that doesn’t impact the total dollar amount that is eligible. Each borrower who meets the income criteria is eligible for up to $10,000 in total across all their qualifying loans outstanding. However, if you took out a Pell Grant in your own name, you could qualify for up to $20,000 in relief.

I paid off my Parent PLUS loans already. Can I get a refund?

No, this is one-time aid tied to the pandemic, and the Dept. of Education isn’t issuing refunds for Parent PLUS loans repaid in the past. One exception: if you carried your Parent PLUS loan into the pandemic and continued to voluntarily pay it down during the pandemic pause on payments and interest that went into effect in March 2020, then you can apply to your servicer for a refund of the payments made during that time.

I refinanced my federal Parent PLUS loan with a private company. Am I eligible for forgiveness?

No, private loans aren’t currently eligible for forgiveness.

Will the amount forgiven be counted as taxable income?

No, the White House confirmed that the amount forgiven won’t be treated as taxable income for federal income tax purposes.