Student Loan Forgiveness Income Limit: What You Need to Know in 2024

Quick Facts

• There is no specific income limit for broad student loan forgiveness in 2024, as the previous $125,000 cap program was struck down.
• Income still plays an important role in determining eligibility and forgiveness amounts in existing programs like Income-Driven Repayment (IDR) plans and Public Service Loan ForgivenessPublic Service Loan Forgiveness (PSLF)A federal program that forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for a government or qualifying nonprofit employer. (PSLF) Program.
• The SAVE planSAVE Plan (SAVE)The Saving on a Valuable Education Plan, a federal income-driven repayment plan introduced in 2023 to replace REPAYE. Its implementation has been subject to ongoing litigation, and enrolled borrowers have faced court-ordered forbearance periods., while implemented for payment calculations, faces legal challenges for its forgiveness component. The Biden administration has also proposed a “Plan B” forgiveness targeting specific groups of borrowers.

Overview

There is no income limit for any student loan forgiveness program offered by the Education Department. President Biden’s first student debt relief plan had an income cap, but that plan was struck down by the Supreme Court in 2023.

But income still plays a significant role in these programs.

Related: Biden Student Loan Forgiveness Update

Biden's Original Student Loan Forgiveness Plan

While no longer active, President Biden’s initial student loan forgiveness plan provides context for understanding how income affects debt cancellation:

During the pandemic, the White House proposed cancelling up to $10,000 in federal student loan debt for eligible borrowers, with Pell Grant recipients qualifying for up to $20,000 in cancellation. This plan included an income limit, a key difference from current forgiveness options.

Eligibility depended on a borrower’s adjusted gross incomeAdjusted Gross Income (AGI)A borrower's total taxable income minus specific deductions, as reported on a federal tax return. Federal income-driven repayment payments are generally calculated using AGI. (AGI):

• Single filers: AGI below $125,000
• Married couples filing jointly: AGI below $250,000

The plan aimed to provide relief based on discretionary income, similar to income-based repaymentIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments. plans. It would have affected millions of Americans struggling with student loan debt, potentially eliminating the entire loan balance for many.

Eligible loans included:

• Direct subsidized and unsubsidized loans
• Graduate and Parent PLUS loans
• Most loans that qualified for the federal student loan payment pause

The Department of Education was including certain Federal Family Education Loans (FFEL) and Perkins Loans not held by the federal government. However, private student loans were not eligible for this cancellation program.

The federal government estimated that 90% of relief would go to borrowers earning less than $75,000 per year. However, the Supreme Court struck down this plan in 2023, leading to the current landscape where income limits don’t apply to forgiveness programs but still significantly affect repayment options.

How Income Affects Student Loan Forgiveness

While there’s no income limit for student loan forgiveness programs, your income significantly affects your eligibility and potential benefits. Here’s how:

1. Income-Driven RepaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments. Plans: Your income and family size determine your monthly payment amount on direct loans and consolidation loans. Lower payments can lead to more forgiveness of the remaining balance after 20-25 years. Popular IDR plans include Income-Based Repayment (IBR), Income-Contingent RepaymentIncome-Contingent Repayment (ICR)The oldest federal income-driven repayment plan, with payments generally set at 20% of discretionary income or a fixed 12-year amount, whichever is lower. It is the only IDR plan available to Parent PLUS borrowers after consolidation. (ICR) and Biden’s new SAVE Plan.
2. Public Service Loan Forgiveness: While there’s no PSLF income limit, your income determines your IDR plan payments. Lower income often means more forgiveness after 10 years of qualifying payments for full-time nonprofit or government employees.
3. Borrower Defense: Income isn’t a factor in eligibility or discharge amount for getting a Borrower Defense to Repayment discharge. This applies to direct loans used at schools that misled students.
4. Total and Permanent Disability DischargeTotal and Permanent Disability Discharge (TPD)A federal loan discharge for borrowers who are totally and permanently disabled, as documented by the Department of Veterans Affairs, the Social Security Administration, or a physician's certification.: Income used to be monitored for three years after getting a disability discharge but that monitoring didn’t affect initial eligibility. This can affect both federal and private student loanPrivate Student LoanA student loan issued by a bank, credit union, or other private lender rather than the federal government. Private loans generally lack federal protections like income-driven repayment and broad forgiveness programs. repayment.
5. Saving on a Valuable Education (SAVE) Plan: This new plan provides more generous terms than past IDR plans, lowering monthly payments for eligible borrowers. It allows those with original principal balances of $12,000 or less to have their debt forgiven after 10 years. While implemented for payment calculations, a court injunction blocks its loan forgiveness component.
6. Proposed “Plan B” Forgiveness: The Biden administration has introduced a new debt relief plan targeting specific groups of borrowers. This plan aims to provide targeted relief through existing laws and programs, focusing on borrowers facing financial hardship or who attended low-value programs.
7. Forbearance and Deferment: These temporary solutions don’t offer forgiveness but can pause payments during financial hardship. Income is often a factor in eligibility, especially for economic hardship deferment.

Related: Is SAVE Plan Worth It?

Strategies to Maximize Forgiveness Based on Income

Even without specific income limits, you can optimize your student loan forgiveness options:

1. Choose the right IDR plan: Compare plans to find the one that offers the lowest monthly payment based on your income.
2. Recertify income annually: Ensure your payments reflect your current financial situation.
3. Time your income certification: If your income fluctuates, certify when it’s lower to potentially reduce payments.
4. Consider tax implications: Forgiven loan amounts may be taxable. Plan accordingly.
5. Explore PSLF if eligible: Combine PSLF with an IDR plan for potentially significant savings.
6. Stay informed: Keep track of proposed changes to forgiveness programs that may affect income considerations.

Related: What is the Income Limit for Income-Driven Repayment Plans?

Where to Find Current Information on Income and Loan Forgiveness

Staying informed about student loan forgiveness programs is important. Here are reliable sources for up-to-date information:

1. Federal Student AidFederal Student Aid (FSA)The office within the U.S. Department of Education that manages federal grants, work-study, and student loans. It runs the FAFSA, the StudentAid.gov website, and oversees the federal loan servicers. website: StudentAid.gov is the official source for all federal student loan programs and forgiveness options.
2. Your loan servicerLoan ServicerThe company that manages a borrower's federal student loan account, processes payments, and handles applications for repayment plans, deferment, forbearance, and forgiveness on behalf of the U.S. Department of Education.: Contact them directly for personalized information about your loans and forgiveness options.
3. National Consumer Law Center’s Student Loan Borrower Assistance Project: This website provides comprehensive, up-to-date information on borrower rights and loan forgiveness programs.
4. The Institute of Student Loan Advisors: TISLA offers free, neutral, and accurate resources on student loans and forgiveness options.
5. U.S. Department of EducationU.S. Department of Education (ED)The federal agency that oversees federal student aid programs, issues regulations for federal student loans, and is the ultimate lender on Direct Loans. updates: Ed.gov is one of their official channels for the latest information on legal challenges to the SAVE plan and developments of the “Plan B” forgiveness proposal.
6. Our free weekly newsletter: Sign up to receive digestible updates on student loan policies and forgiveness options

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Bottom Line

There is no income limit for current forgiveness programs. But your income affects your eligibility and benefits. Stay informed about current programs and proposed changes. Consider consulting with a student loan expert to understand how your income affects your forgiveness options and to develop a personalized repayment strategy.

Book a 1:1 consultation with one of our student loan experts to get personalized guidance on maximizing your forgiveness options based on your unique financial situation.