Author: Shannon Hanes
On Wednesday, President Biden declared that he would forgive up to $10,000 in federal student loans for millions of borrowers. The announcement carries forward Biden’s pledge throughout his campaign to reduce the burden of student loan debt.
However, the borrowers who qualify for debt cancellation are those who make less than $125,000 annually or $250,000 for married couples filing jointly.
Furthermore, students who get Pell Grants, who account for the majority of student loan debtors, will be qualified for an extra $10,000 in debt relief, for a total of $20,000 in debt relief.
In addition to the debt forgiveness, Biden announced that his administration would extend the federal student loan repayment pause through December 31. The break was initially supposed to end on August 31.
Biden’s Student Loan Debt Cancelation
President Biden discussed how the price of higher education had increased dramatically over the previous few decades during a speech at the White House. “A whole generation is now burdened with huge debts in exchange for, at least, an effort at a college degree,” he claimed in his speech.
He continued that the load is so huge that even if you graduate, you might not be able to live the middle-class life that a college education previously guaranteed.
President Biden hopes that by canceling debt, people will finally be able to escape their economic burden and begin to consider purchasing houses, having families, and beginning businesses.
Eligibility for the $10,000 Student Loan Debt Cancelation
Borrowers may be eligible for debt cancellation according to their income in the 2020 or 2021 tax year. The US Department of Education will require most qualified debtors to complete an application before they may get debt relief.
According to the department, these forms will be accessible in the upcoming weeks. Please keep a look out for them.
Graduates, undergrads, parents, and loans are all eligible for debt forgiveness. Current students may also be suitable; however, dependent students will be considered based on their parent’s income rather than their own.
New Income-driven Repayment Plan
President Biden unveiled a new, income-driven method for repaying student loans on Wednesday. According to the president, the new repayment scheme would limit monthly payments for undergraduate loans to 5% of the borrower’s discretionary income. In most current plans, the rate is 10%; therefore, this is a decrease.
According to the White House, up to 20 million borrowers might have their outstanding student loan balances forgiven, and over 43 million will benefit from this repayment plan.
Is $10,000 Debt Forgiveness Enough?
Many argue that the $10,000 student loan debt forgiveness is better than nothing, even though it is less than the $50,000 some Democrats had advocated.
Natalia Abrams, the Student Debt Crisis Center founder, asserts that even though this announcement represents a significant victory for many people, it will still leave many buried in debt.
She also emphasized that more details will be required to address who is eligible for the aid.
On the other hand, the White House underlined that the debt cancellation’s income cap would guarantee that those with low and middle incomes would be relieved from school debt.
Summary
The Biden administration stated that up to $10,000 in student loan debt would be forgiven for borrowers earning less than $125,000 annually. An additional $10,000 for Pell Grant applicants, for a total of $20,000 in debt forgiveness. The income cap is intended to help low and middle-income earners reduce their debt. For eligible individuals, an application form will be accessible on the Department of Education’s website in the coming weeks.