President Biden Announces Student Loan Forgiveness and Forbearance Decisions – Investopedia
Today, President Biden announced his long-awaited plan to forgive up to $10,000 in federal student loans for millions of borrowers. The President also further extended the pause on federal student loan payments, interest, and collections until the end of the year.
According to Federal Student Aid, borrowers with annual incomes of less than $125,000 (individuals) or $250,000 (families) will be eligible for up to $10,000 in federal student loan forgiveness. An additional $10,000 in student debt relief will be available for recipients of Pell Grants. In both cases, the amount of relief a borrower will receive is capped based on their outstanding debt. For example, a Pell Grant recipient with a debt balance of $19,000 will not receive $1,000 of the $20,000 in relief they are eligible for.
Approximately 8 million people may automatically receive relief due to the United States Department of Education already possessing their relevant income data. For those uncertain whether or not the Education Department has their income data (as well as those who know they do not have it), an application will be launched by the Biden-Harris administration within the coming weeks.
According to the Education Department, nearly one-third of U.S. borrowers owe less than $10,000, while over half owe less than $20,000. Student debt cancellation of $10,000 per borrower was one of Biden’s 2020 campaign promises, though an income cap wasn’t considered until more recently.
Borrowers who are employed by nonprofits, the military, or federal, state, tribal, or local governments may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program, thanks to time-limited changes that waive certain eligibility criteria in the PSLF program. These temporary changes expire on Oct. 31, 2022, so enrollments after this date will not be eligible.
The Biden-Harris administration has also confirmed part of the President’s plan includes an extension of the COVID-19 emergency relief for student loans to Dec. 31, 2022. This decision comes just one week before the pause on payments, interest, and collections was previously set to expire.
The freeze was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law by then-President Trump on March 27, 2020. This forbearance was originally set to end Sept 30, 2020, but it was extended six times over the subsequent two years. This final extension will occur automatically and without any action required from borrowers.
Finally, a rule is being proposed to create a new income-driven repayment plan. The details of this rule include:
This announcement is part of the Biden-Harris administration’s larger student debt forgiveness efforts. Thus far, $32 billion in education loan relief has already been approved for more than 1.6 million U.S. borrowers, including $13 billion for borrowers who were taken advantage of by the institutions they attended and $9 billion in total and permanent disability discharges.
Ahead of the President's announcement, the Department of Education announced on Tuesday the approval of over $10 billion in debt relief for more than 175,000 borrowers as part of the Public Service Loan Forgiveness (PSLF) program.
Federal Student Aid. "The Biden-Harris Administration's Student Debt Relief Plan Explained."
AP News, citing the Education Department. "Student Loan Help for Millions Coming From Biden After Delay."
Federal Student Aid. "COVID-19 Emergency Relief and Federal Student Aid."
U.S. Department of Education. "Thanks to Temporary Changes, U.S. Department of Education Announces Public Service Loan Forgiveness Surpasses $10 Billion in Debt Relief."
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