August 30

Student Loan Cancellation is Here for the Restaurant Industry


The Biden Administration forgives up to $20,000 of federal student loans — a big deal for hospitality workers.

Days before the federal student loan payment pause was about to expire, The Biden Administration swooped in, extending the pause until the end of the year.

The good news didn’t stop there. President Biden pushed forward on his promise to cancel $10,000 of federal student loans for millions of borrowers and $20,000 for those with Pell Grants.

This is huge news. While it’s not the extent of forgiveness many democrats were fighting for, it’s a step in the right direction. It will change the lives of millions of borrowers across the nation — many of whom work in the hospitality industry.

We’re still waiting on more information, but here is what’s being proposed if you qualify for federal loan cancellation.

Here’s what we know

Do I qualify for debt cancellation?

If you have federal student loans, whether you graduated college or not, you might qualify! It’s all based on the annual income reported in your 2020 or 2021 tax return.

If you made less than $125,000 as a single taxpayer, or if you’re married and filed jointly with a household income under $250,000—you’ll qualify for $10,000 in debt cancellation.

If you meet the income criteria and received a Pell Grant, you could qualify for $20,000 forgiveness.

Private loans do not qualify for cancellation. Only federal loans received before June 30th, 2022, including Federal parent PLUS loans, are eligible.

Federal loans are held through the U.S. Department of Education through federal loan servicers. Here is a list of all the federal loan servicers in case you’re unsure if your loans are eligible.

Seemingly if you have federal student loans and make under the prescribed amount, then you qualify — even if you went to a private culinary school.

Unfortunately, not all culinary schools are accredited by the Department of Education and cannot receive federal funds—meaning students of those institutions never received federal aid.

How will my loans be canceled?

According to the U.S. Department of Education, nearly 8 million borrowers will be eligible to see relief applied automatically because the department has relevant income data.

For instance, if you recently applied for an income-based repayment plan, the U.S. Department of Education already has your income information.

If the U.S. Department of Education does not have updated income information, or you are unsure, then you will be able to complete an application provided by the administration.

The U.S. Department of Education claims they will make the application available before the extended pause on student loan repayments ends on December 31st.

If you’re worried you’ll miss it, you can sign up to be notified when the application becomes available here.

What else should I know?

$10,000 is a lot, but many borrowers have much more debt than that. The Biden Administration also proposed a new rule to lower monthly payments when participating in an income-based repayment plan.

The new proposal will help borrowers manage their debts when repayment begins next year.

Here’s how it will work:

1. Reconsidering discretionary and non-discretionary income.

The new proposal on income-based-repayment plans will cap monthly payments to 5% of discretionary monthly income.

Discretionary income is the money left over after taxes and essential cost-of-living expenses.

They are also proposing to increase non-discretionary income, meaning they’re extending what is considered essential expenses so that discretionary income (what’s left over and what your payments are based on) shrinks. The effort here is to guarantee that borrowers earning under 225% of the federal poverty level (about a $15 minimum hourly wage for a single person) will not have to make a monthly payment.

Some income-based payment plans can bring payments down to $0.

2. Forgive loan balances after ten years of payments instead of twenty years.
Currently set at 20 years for borrowers with loan balances of  $12,000 or less.

3. Cover unpaid monthly interest. 
Unlike existing income-based repayment plans, this proposal will ensure that loan amounts will not grow as long as borrowers make their monthly payments, even if they are set to $0 based on a low income.
We’re still holding our breath on how this will roll out. With such a large sum being forgiven to many borrowers, there will undoubtedly be some bumps in the road.

Until then, this is a massive win for hospitality professionals nationwide — so let’s bask in this much-needed and anticipated relief!


About the author

Ashley McNally likes to cook, loves to bake, and is always dreaming of her next meal. With over 13 years of experience working in various roles within a restaurant — McNally has made a home in hospitality.

About the author

Ashley McNally likes to cook, loves to bake, and is always dreaming of her next meal. With over 13 years of experience working in various roles within a restaurant — McNally has made a home in hospitality.