President Biden’s Student Loan Forgiveness Plan Explained (And How to Pay Off The Rest)

3 min read

Anthony O'neal
President Biden’s Student Loan Forgiveness Plan Explained (And How to Pay Off The Rest)


President Biden's $10,000 in student loan forgiveness is a big deal, but it's a small dent in our country's $1.75 trillion student debt crisis. The average borrower owes $28,950. That means that they still owe almost $19,000 even with $10,000 of loans forgiven.

If that's you, and you'll still owe student loans after the $10,000 loan forgiveness, I want you to read to the end. I will teach you how to pay off the remaining student loans and be free of student debt. Let’s start by understanding President Biden’s student loan forgiveness plan!

The Biden-Harris Administration's Student Debt Relief Plan Explained 

The Biden-Harris Administration's Student Debt Relief Plan is part of a three-part plan designed to make it easier for people to repay their student loans:

  • Part 1: Student loan repayments stay paused until December 31, 2022.
  • Part 2: $10,000-$20,000 of debt canceled for borrowers who make less than $125,000 individually or $250,000 for households
  • Part 3: Changes to income-driven repayment plans.

Let’s explore each one.

Part 1: Student loan repayments stay paused until December 31, 2022.

Biden is extending the moratorium on federal student loan interest and payments imposed by President Donald Trump. As part of the student loan forgiveness plan, borrowers will resume payments after December 31. 

So those of you who had student loans paused for the last two years because of COVID-19 have a few months of paused payments left from the time this blog is released. Afterwards, you’ll have to pay those loans again.

Part 2: $10,000-$20,000 of debt canceled for borrowers who make less than $125,000 individually or $250,000 for households

This part of the plan entails loan forgiveness of up to $20,000 for Pell Grant borrowers and $10,000 for non-Pell Grant borrowers. However, there’s some fine print that I want you to pay attention to. 

Originally, borrowers who took out both Perkins Loans and Federal Family Education Loans qualified for forgiveness, but that’s no longer the case. At first, Biden’s forgiveness plan covered those who consolidated their FFEL loans into Direct Loans with the federal government. Now, they no longer qualify, excluding roughly 800,000 borrowers from Biden’s relief plan.

How do you know if you received a Pell Grant? 

There's a good chance you got one as part of your college financial aid package: According to the White House and the department of education, more than 60% of the 43 million borrowers who will benefit from the administration's loan forgiveness plan are Pell Grant recipients.

If you're unsure whether you received a Pell Grant as part of your financial aid package, log in to and check your account. There is a section titled "My Aid" on the main page of your account.

The department of education also advises that you can also inquire with the financial aid office at your college to check whether they can provide you with that information. Remember that regardless of the size or frequency of your Pell Grants, you can still qualify for up to $20,000 in forgiveness under the student loan forgiveness program. Therefore, you may still qualify even if you only received a partial Pell Grant or had a Pell Grant for one year.

What about Public Student Loan Forgiveness?

Those who have worked in government (federal, state, local, tribal, or non-profit) for ten years or more (even if not consecutively) may be eligible to have their student loans forgiven under the Public Service Loan Forgiveness Program. 

PSLF encourages students to pursue service careers that are also relatively low-paying, such as firefighting, public interest law, military service, and religious work. Due to the waivers for PSLF qualification, the waivers for public service loan forgiveness qualification, a wider range of previous government loans will count toward forgiveness.

Under the loan forgiveness program, people will have their student loans automatically forgiven, but most will have to apply. Applications open in October 2022 and close in December 2023. The cancellation could erase student debt for 20 million borrowers and reduce balances for an additional 23 million.

The Biden Administration even launched a Limited PSLF Waiver. It’s a temporary initiative enacted in 2021 to help more people to qualify for loan forgiveness, however the waiver ended October 31, 2022. Now, the Education Department is looking to extend the benefits of the waiver through the summer of 2023 under the IDR Account Adjustment initiative, which is expected to take effect by July 1, 2023.

Part 3: Changes to income-driven repayment plans.

Biden and Harris are creating a new income-driven student loan forgiveness and repayment plan. The plan will reduce future monthly payments for lower- and middle-income borrowers by changing rules around discretionary income. It means forgiving accounts of less than $12,000 after ten years and covering unpaid monthly interest if the borrower continues making monthly payments. 

Borrowers who qualify for these plans will have their maximum monthly payments reduced from 10% to 5% of their discretionary income. The state, in conjunction with the department of education, will forgive debt after ten years rather than 20 or 25 years. Also, the government will cover the remaining monthly interest, so borrowers' balances do not grow. 

Paying off the rest of your student loans

This plan is a big deal, and it’ll wipe debt for millions of people, but most people will still have student loans after the forgiveness. If that's you, here's what you need to do to pay them off.

1. Get on a budget.

Make a monthly zero-based budget, so you have a clear picture of your income and expenses and can throw every extra dollar at your debt.

List all of your income for the month. Outline all the earnings you make throughout the month. Include all the income you get from your job and your business. 

List your fixed expenses, including your debts. It allows you to track where all your money is going. These may include rent, credit card repayments, student loans, etc. 

List other common monthly expenses. You also have to include expenses like food, utilities, and expenses for other personal needs. 

Subtract your total monthly expenses from your income. Doing this gives you an idea of how much of what’s left you can direct to savings, investments, etc. 

Track your expenses throughout the month. Monitoring your expenses will help you see where most of your money goes. You will be in a good position to establish and reduce all the unessential expenses. 

2. Save $1,000 starter emergency fund in a separate account.

Emergencies occur when you least expect them and are almost always costly. When you save money for rainy days, you avoid expensive debt. I advise having at least three months' worth of expenses (approximately $1000) saved and accessible for emergencies.

If you have more than $1,000 saved, I want you to keep $1,000 saved and use the rest for the next step. 

If you reduce the unnecessary expenses and have more than $1000 saved, let that $1000 sit in your emergency fund and use the excess cash to settle your debts. 

Trust me, that $1,000 will be enough to cover you while you pay off your debts. $1000 is a decent amount that will help you cover most emergencies that might arise. It will also save you the trouble of going on a borrowing spree from banks, loan sharks, friends, and other lenders with exorbitant interest rates. 

3. Clear your debt with the Debt Snowball Method.

List your debts from smallest to largest, irrespective of interest rate or monthly payment. 

Create a list of all your debts (credit cards, store cards, car loans, home loans, personal loans, student loans, and so on) and arrange them in ascending order from the account with the smallest balance to the account with the largest balance. 

Continue making the minimum payment on all your debts, but take all your extra income and throw it at your smallest debt until it's paid off.

You initially prioritize paying off the smallest debt in the shortest time while continuing to make payments on other debts. When you clear the smallest debt, you redirect the funds you were allocated for that debt to the debt with the next small dollar amount. It is referred to as "rolling over" your payment. The method is based on gaining momentum. As you see those debts get paid off, you’ll gain motivation to keep attacking those huge debts.  

4. Get a second job.

Getting a second job to clear your student loan is a wise move. You will have more money to work with if you work a second job to pay off your debt. You can use all of this income to aggressively pay off your debt or use some of it to build your financial reserves. Increasing your income sources to clear your debts does not have to be a long-term commitment. It could be a one-time thing only to help you pay off your debt. 

5. Sell extra stuff.

A yard sale would be an especially good way to make extra money to pay off your student loan. Commit to paying off your debts with all of your profits. Whether selling items on eBay or making items to sell on Etsy, you can earn a significant amount each month to pay off your student loan. Remember all the items you've bought over the years that quickly lost their appeal or did not live up to your expectations. It's time to eliminate the clutter and turn it into cash. Also start going to garage sales and thrift stores in your area to find bargains that you can turn into cash cows through online auctions and sales. 

6. Start a side hustle.

Many see side hustles as a way to supplement their income to cover short-term expenses or fund a specific purchase. Did you know that you can use these side hustles to help you pay off your debt? Earning extra income on the side is easier than you think. Here are some suggestions for side hustles:

  • Tutoring and Teaching: Work with many tutoring services available online or in your local community to turn your knowledge into money. They have a variety of part-time jobs available, teaching math, science, and reading to students of all ages. The Internet can also broaden these opportunities by allowing people to work as English teachers to students worldwide.
  • Freelancing: Turn your skills into money by working as a freelancer in your field. The Internet has allowed many to earn extra money in ways they could never have imagined a decade ago. There are various opportunities to earn extra income online, ranging from computer programming to writing to transcription, graphic design, and everything in between. You can look for these fantastic opportunities. There are numerous job boards available to assist people like you in finding work, including:
  • Fiverr
  • Upwork

It usually takes two years to completely pay off your debts using the debt snowball method, but with loan forgiveness, it'll take you even less time.  

The debt snowball method is super effective, that’s why I recommend it. That $10,000-$20,000 of debt will be canceled for borrowers earning less than $125,000 individually, or $250,000 for households means this program will reduce an estimated 23 million borrowers' balances. It means more ability to pay off the remaining amount much more quickly. 

7. Stop borrowing money after your debts are paid off.

Don’t get accustomed to the government bailing you out. It would be foolish to continue taking more loans once you have successfully cleared your debt just because initiatives like President Biden's student loan forgiveness plan exist. You may encounter a situation where the policies of other possible future, similar initiatives do not favor you and, thus, leave you in a fix and unable to handle your repayments well. 

I you’re looking to go back to school soon, pay cash for your education or look for scholarships.

Try your best to use cash to fund your education. You can work part-time to raise cash for school. Alternatively, you can seek scholarships too. Fellowships or teaching assistant roles are also a great way to fund your education.

You can apply for merit-based scholarships, which are given to deserving students based on various factors such as academics, achievements, hobbies, talents, and affiliations with various groups or careers such as medicine. You can also look for sports scholarships given to students who excel in sports and want to be a part of a college or university team. 

Final Thoughts

President's Biden student loan forgiveness program received a warm welcome from borrowers. Hopefully, I’ve given you some valuable insight to help you understand the program, how it affects you and how to pay off any remaining loans you might have. Debt payoff is not easy, but you can hack it if you focus and work hard. Trust me, the reward will be financial freedom, and that’s worth the sacrifice!

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