By Kendall McLeroy
As of Wednesday August 24th, the Biden-Harris Administration and the U.S Department of Education has announced a plan to initiate a student loan forgiveness plan.This plan would relieve up to $20,000 worth of debt from millions of Americans and is targeted at assisting working class and middle class individuals recover as pandemic-related financial support begins to end.
This forgiveness plan is outlined to be enacted in a three step process. Firstly a final extension will be added to the student loan repayment pause. During the events of the pandemic, the Biden Harris administration added extensions to repayment plans throughout their time in office. Thus causing no one with a federally held loan to have to pay any money towards their debt since Biden’s inauguration. For those worried about extending their student loan pauses into the end of the year, the Biden-Harris Administration has extended a final pause to December 31, 2022.
Payments will resume for debtors the following January 2023, which is where the second step of the plan comes into effect. As stated previously, this forgiveness plan targets low to middle income households. Qualifiers must make less than an annual income of $125,000 individually, or $250,000 for married couples. For those who do qualify, the U.S Department of Education plans to grant up to $20,000 worth of debt cancellation to Pell Grant recipients and upwards of $10,000 for those who did not receive Pell Grants. Additionally, according to the Federal Student Aid cooperation, “borrowers who are employed by nonprofits, the military, or federal, state, Tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program.” However, these applications expire October 31 of this year.
Thirdly, the Biden-Harris administration plans to make the future of student loans more accommodating and accessible for incoming college students and borrowers. President Biden has proposed a new rule to, as stated by the U.S Department of Education, create “a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers.” Though income-based repayment plans are not a new thing, this new rule would forgive balances after 10 years of debt repayment, cover unpaid monthly interest, would not require more than 5% of monthly discretionary income, amongst other things.
Reactions have been mixed regarding this recent proposition. Some argue that this new plan will do more harm than good, offering the idea that this proposition is poorly targeted and discards a demographic referred to as the “overlooked borrowers.” Due to the newness of this plan, we still have little to no idea of how it’s going to play out and the effects it will have on the future of federal loan borrowing for students across the United States.