President Joe Biden unveiled his strategy to reduce student loan debt, which includes extending the pandemic-related payment moratorium and forgiving some borrowers’ debt. By extending previously-existing forgiveness programs for public sector employees, borrowers who are disabled and students who were scammed by for-profit colleges, the Biden administration has already cancelled roughly $32 billion of the $1.6 trillion in outstanding federal student debt.
Additionally, it prolongs the monthly student loan payments moratorium, delaying their resumption until at least January. It offers information on a fresh proposal to develop a more reasonable income-driven repayment plan. Here are some frequently asked questions concerning the cancellation program and the responses you can expect from the White House, which is regarded as the Department of Education, and student loan servicers.
Providing low- and middle-income families with targeted debt relief
The U.S. Department of Education will offer up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt cancellation to non-Pell Grant recipients to ease the transition back to repayment and assist borrowers at highest risk of delinquencies or default once payments resume. If a borrower’s household income is less than $250,000 or their income is less than $125,000, they are eligible for this relief.
Your adjusted gross income will be used as the basis for eligibility. You may be eligible based on income from 2020 or 2021, but not 2022 income. If you fulfilled these income restrictions and got a Pell Grant, you may be eligible for an additional $10,000 cancellation. For relief, only loans disbursed by June 30 are qualified.
Additionally, through the Public Service Loan Forgiveness (PSLF) program, borrowers who work for non-profit organizations, the armed forces, or local, state, tribal, or federal governments may be qualified to have all their student debts forgiven. This is a result of temporary modifications.
How will the authorities know if the student received a Pell Grant?
They employ administrative data in their methods. Additionally, they are enhancing online accounts to make your Pell history more understandable. The time is not suitable to delete or shred your Pell Grant records, but if you have easy access, it can’t harm you to save them somewhere secure.
The suspension in student loan repayment has been extended in full.
The Biden-Harris Administration has repeatedly extended the student loan repayment moratorium due to the pandemic’s economic difficulties. As a result, since President Biden took office, no one with a federally held debt has been required to make any loan payments.
The Biden-Harris Administration will prolong the suspension one further time through December 31, 2022, with payments beginning in January 2023, to ensure a smooth transition to repayment and avoid unneeded defaults.
Popular justifications for canceling student loans
• Borrowers’ lives have been postponed as a result of student debt. Debt cancellation advocates contend that student debt hinders borrowers from making important financial decisions, such as starting businesses, purchasing homes, getting married, and starting families.
• The racial wealth gap might be closed by canceling student loans. Supporters cite statistics demonstrating how many Black and Hispanic families are more likely to rely on student loans to pay for college due to a lack of generational wealth. Black and Hispanic graduates usually earn less than other graduates and are, therefore, more likely to default on their loans, continuing the disparities long after graduation.
• Not every borrower possesses a degree that increases income. According to Brookings, those in debt who lack a degree are four times more likely to default than those with a degree. According to survey data, 41.8% of students who started college in 2011–12 took out student loans. However, just 59% of students had finished their bachelor’s degrees after six years. The higher lifetime earnings typically associated with completing college are not advantageous to borrowers without degrees.