Biden Announces $10,000 in Student Loan Forgiveness, With a Twist

Kat Tretina

On Wednesday, President Joe Biden announced that the Department of Education would provide up to $10,000 in student loan forgiveness to individuals making under $125,000. He also added a twist: individuals who received Pell Grants as students are eligible for up to $20,000 in relief.

He also extended the pause on student loan payments and interest until the end of 2022.

Thanks to the CARES Act, federal loan borrowers haven’t had to make a student loan payment in over two years. These relief benefits were most recently set to expire on August 31, 2022, before Biden extended them. 

This means that payments and interest charges will now resume on January 1, 2023.

Here’s what this means for your student loans — and how to plan ahead.

Student loan forgiveness is here at last

American college grads and their parents owe $1.75 trillion in student loan debt, with an average balance of roughly $30,000.

These borrowers have been waiting for student debt relief ever since Joe Biden promised $10,000 in student loan forgiveness during his presidential campaign.

Now that this forgiveness program has been formally announced, let’s take a look at who it will benefit.

Who qualifies for student loan forgiveness?

According to the announcement, the $10,000 in forgiveness will go to individuals earning under $125,000 per year, or $250,000 per year for married couples that file taxes jointly.

Additionally, Biden announced that individuals who received Pell Grants would receive an increased forgiveness amount of $20,000. Pell Grants are generally awarded to students who come from families with income below $60,000 per year. 

Only certain types of federal student loans are eligible. If you have private student loans, this student loan relief package will not apply to them.

What happens to the rest of my student loan balance?

The CARES Act’s student loan benefits were most recently set to expire August 31, 2022. But President Biden just extended the protections until the end of the year.

If you had eligible federal loans, you haven’t been required to make payments and no interest has accrued on your loans since the CARES Act was implemented in 2020.

On January 1, 2023 you will officially begin making payments and accruing interest on any remaining federal student loan balance you have after Biden’s student debt relief.

Planning ahead for January — should you refinance your student loans?

It’s important to have a game plan for the restart of federal student loans on January 1, 2023. Once the CARES Act expires, refinancing your student loans could be a smart idea.

While the CARES Act was in place, it didn’t make sense for you to refinance; payments were suspended, and interest was waived. But once payments and interest resume, student loan refinancing can help you save money and pay off your loans faster.

With refinancing, you apply for a loan from a private lender that is big enough to pay off your existing student loans. Your refinanced loan will have a different interest rate and loan term from what you had previously.

Just how effective is student loan refinancing? Consider this example: Jeff had $50,000 in student loans at 6.7% interest and a 10-year repayment term. Over the course of his repayment, Jeff would pay a total of $68,741; interest charges would cost him over $18,000.

To save money, Jeff decided to refinance his loans. He opted for the same 10-year term and qualified for a 4.80% interest rate. By refinancing his loans, he’d repay a total of just $63,054; refinancing helped him save over $5,600.

In addition, by refinancing, Jeff’s student loan payment went down by $47 per month.

  Original Loan Refinanced Loan
Interest Rate 6.7% 4.8%
Loan Term 10 Years 10 Years
Minimum Monthly Payment $573 $525
Total Interest $18,741 $13,054
Total Repaid $68,741 $53,054
Total Savings: $5,687

If you decide to refinance your student loans, use Purefy’s Compare Rates tool. It allows you to get quotes from multiple lenders at once so you can find the best refinance rates.

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What if I can’t afford my student loan payments?

If you cannot afford your payments, consider these alternative strategies for managing your loans:

1. Apply for loan deferment or forbearance

If you have federal loans and are unemployed or dealing with a medical emergency, you might be eligible for a federal deferment or forbearance. With these options, your loan servicer will allow you to temporarily suspend your payments, even after the CARES Act expires.

In most cases, interest will accrue during your deferment or forbearance period. However, not having to make your minimum payments can give you time to find a job or rebuild your savings.

2. Consolidate your loans

Federal loan borrowers can also take advantage of Direct Consolidation Loans. With this approach, you combine your loans into one. When you consolidate, you can extend your repayment term up to 30 years. With a longer loan term, you’ll pay more in interest charges over time, but you’ll also reduce your monthly payments and get more breathing room in your budget.

Consolidating certain loans also can make you eligible for other federal benefits, such as income-driven repayment (IDR) plans. For example, Parent PLUS Loans aren’t eligible for IDR plans unless the borrower consolidates the loan first.

3. Enroll in an income-driven repayment plan

For those who cannot afford their monthly payments under a 10-year Standard Repayment Plan, IDR plans can give you substantial aid. Available only to federal loan borrowers, IDR plans extend your repayment term and base your monthly payment on a percentage of your discretionary income. Depending on your family size and income, you might be able to significantly lower your monthly payment.

Plus, you might qualify for loan forgiveness with an IDR plan. At the end of your repayment term — 20 or 25 years, depending on your repayment plan — your loan servicer will forgive the remaining balance on your loans if you have one. However, the forgiven amount might be taxable as income, so make sure you set aside some money for your tax bill.

4. Refinance to a longer repayment term

When you refinance, you get to choose a new repayment term that fits your needs. Most lenders offer options in the 15 to 20 year range, which can go a long way to easing your monthly expenses.

Here are some examples of monthly payments you could get if you qualified for a 5.0% interest rate on a refinance loan:

Loan Balance

15 Year Loan

20 Year Loan


$158 per month

$132 per month


$277 per month

$231 per month


$395 per month

$330 per month


$633 per month

$528 per month


$791 per month

$660 per month


$1,168 per month

$990 per month


$1,582 per month

$1,320 per month

Interested in Student Loan Refinancing? Compare rates from top-rated lenders and see how much you could save.

Checking your rates takes 2 minutes and has no impact on credit. 

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.64% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.64% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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