Income Limits on Biden Student Loan Forgiveness Plan: Here’s Where Things Stand

Editor's note: On August 24, 2022, the Biden Administration announced that eligible borrowers would receive $10,000 in federal student loan debt forgiveness with income limits of $125,000 for individuals or $250,000 for households/families to qualify for forgiveness. Stay tuned for more details and subscribe to our free weekly newsletter for updates.

The debate over student loan forgiveness continues to rage as President Biden reportedly considers using executive action to implement loan cancellation for a broad swath of borrowers. White House officials aren't only considering whether to enact broad student loan forgiveness, but also whether to limit any such forgiveness to borrowers based on their income.

The Biden administration could make a decision at any time. Top White House officials have repeatedly confirmed that a decision on student loan cancellation would be made before the ongoing student loan payment pause ends. Biden himself has indicated that he could decide within a matter of weeks. 

Here’s where things stand.

Intense debate about student loan forgiveness continues

Student loan forgiveness has been a major point of discussion in Congress, among student loan borrower advocacy groups, and in the Biden White House for over a year. But the prospect of some sort of widespread student loan cancellation seems closer to reality than ever before. Biden and top administration officials have repeatedly confirmed that they're actively considering using executive authority to eliminate some amount of student debt. 

But the debate is getting intense. Republican officials are nearly universally opposed to broad student loan forgiveness. Over 20 House Republicans wrote to President Biden last week, urging him to steer clear of widespread student loan cancellation. “We… firmly believe you lack the statutory authority” to unilaterally cancel student loan debt on a mass scale, they wrote. 

Advocacy groups and some student loan legal experts disagree, pointing to language in the Higher Education Act and HEROES Act of 2003 that provide seemingly broad authority to the Secretary of Education to “waive,” “compromise,” or “modify” federal student loan programs under certain conditions. But that authority has never been tested on a mass scale, and there could be legal challenges.

Even within the Democratic party, views are divided to some extent. The AFL-CIO, one of the nation’s largest labor unions and a key constituent of the party, came out in support of broad student loan forgiveness last week. 

“Organized labor was built on the foundation of creating a pathway to the middle class for everyone, but skyrocketing student loan debt has become an insurmountable obstacle to achieving this goal,” the union said in a statement.

“After all that we have endured in the wake of the COVID-19 pandemic, we cannot ask working people to make further sacrifices. Now is the time to cancel, not collect, student debt.” 

Other labor unions, including the American Federation of Teachers, have supported broad student loan forgiveness, as have major civil rights groups such as the NAACP. The NAACP recently came out against $10,000 in student loan forgiveness (an amount repeatedly floated by President Biden and top administration officials), arguing that this figure inadequately addresses the student debt crisis. 

But although top Democrats, including Senate Majority Leader Chuck Schumer (D-NY), have become ardent supporters of broad student loan cancellation, other party veterans, such as Paul Begala, have expressed more vocal skepticism about universal student debt cancelation, despite polling suggesting it is broadly popular. The editorial boards of liberal-leaning papers such as The New York Times and The Washington Post have also recently come out against universal student loan forgiveness.

Biden considers income limits on student loan forgiveness

White House officials are reportedly strongly considering some sort of income restriction on any broad student loan forgiveness initiative to try to “thread the needle” and make the case that it is targeting debt cancellation for those who need it the most. This would, proponents argue, allow the administration to deflect criticism that student loan forgiveness is a giveaway for doctors, lawyers, and the wealthy elite. 

Administration officials reportedly honed in on limiting relief to borrowers earning between $125,000 and $150,000 individually or jointly filing married borrowers with a combined income between $250,000 and $300,000. More recent reports suggest that the cap may be lower than that — under $125,000 per year for individual filers. 

But any decision to impose income restrictions on broad student loan forgiveness may be fraught. Unlike with the distribution of stimulus checks last year and in 2020, the Department of Education does not have blanket authority to unilaterally access income or tax-filing data for student loan borrowers, and federal law restricts inter-agency sharing of that type of information.

That's why borrowers applying or recertifying for income-driven repayment plans must affirmatively apply each year and either submit a paper copy of their tax return or link to their tax return as part of their online application via an IRS data-sharing tool. 

As a result, if the Biden administration moves forward with broad student loan forgiveness with an income cap, it may require some sort of application that borrowers would need to complete and submit. Not only does this mean that some borrowers may fall through the cracks, but it also may significantly delay any relief, given the millions of borrowers who would likely apply. 

Federal Student Aid officials are already dealing with significant administrative responsibilities in implementing the Biden administration’s prior student loan relief initiatives through Borrower Defense to Repayment, the Limited PSLF Waiver (which expired on October 31, 2022), and most recently, sweeping reforms to income-driven repayment programs.

No income caps on existing student loan forgiveness initiatives

Importantly, the Biden administration is only considering income limits for a future, as-yet-unannounced broad student loan cancellation initiative. There are no income restrictions for targeted student loan forgiveness programs the administration has already announced, including the Limited PSLF Waiver program — which temporarily expanded relief under the PSLF program through October 2022. 

There also is no hard income limit for the new IDR Adjustment initiative, which dramatically expands what can count toward a borrower’s income-driven repayment loan forgiveness term. However, at the same time, income does factor into a borrower’s monthly payments calculated under an income-driven repayment plan.