On Aug. 24 President Joe Biden announced that some (or all) of an individual’s student loan debt may be wiped away under a few qualifications due to a new plan. The plan consists of three parts.
The first part has to do with extending repayment of student loans all the way until January of 2023 for federal borrowers. The second part targets debt relief for students. Each individual can have up to $20,000 worth of debt forgiven. The final part of the plan intends to help make the repayment system of loans more manageable for both current and future borrowers.
In order for student loans to be forgiven, the individual borrower’s income must not be more than $125,000 annually. If the borrower has a spouse or is the head of a household and makes less than $250,000 combined every year, then they qualify for debt forgiveness.
Another aspect of the plan is that the loans must be federal loans, not private. This includes Federal Parent PLUS loans. The amount that a borrower gets in debt forgiveness depends on whether or not they are a Pell Grant recipient.
Pell Grant recipients are able to get $20,000 of debt forgiven, whereas non-recipients are eligible for $10,000. The amount of money that is forgiven is capped by the amount of debt owed. For example, a Pell Grant holder who has $18,000 in federal loans will only have that $18,000 forgiven.
In order to get the debt relief, some borrowers will be required to fill out an application.
“If the U.S. Department of Education doesn’t have your income data, the Administration will launch a simple application which will be available by early October,” said the Office of Federal Student Aid.
Once a borrower completes the application, debt forgiveness can be expected in 4-6 weeks. For some, however, it will be automatic.
According to a poll run on the Chimes Instagram, 25% of students that answered have $0 to $10,000 in debt, 28% have between $11,000 to $20,000, 18% have between $21,000-$30,000 to repay, and 29% said that they have over $30,000 in debt. Overall, at least 75% of students have some sort of debt to pay back that is at (or well over) $11,000.
A recent graphic provided by the White House reveals that the amount of Federal Pell Grants has stayed relatively consistent in the amount given out to students since the 1980’s, with that amount being around $4,000-$7,000 yearly per student.
The average cost to attend a public college has risen from roughly over $8,000 in 1980-1981 to nearly $23,000 in 2020-2021. It should be noted that the graphic included in this article does not cover the cost of private universities, and the cost of a public college has nearly tripled in recent years compared to the 1980’s.
Due to the rising costs in college attendance, a rise in borrowed loans has also occurred. Student loan forgiveness is expected to help roughly 60% of Americans.
