- Pause on federal student loan repayment extends till December 31, 2022
President Joe Biden has announced the forgiveness of student loans to the tune of between $10,000 and $20,000 for borrowers whose income are less than $125,000 or $250,000 for household.
“This plan offers targeted debt relief as part of a comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families,” according to a statement from the White House.
In a three-part plan to provide more breathing room to America’s working families as they continue to recover from the strains associated with the COVID-19 pandemic, President Biden said that the Department of Education will:
Provide targeted debt relief to address the financial harms of the pandemic, fulfilling the President’s campaign commitment. The Department of Education will provide 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. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples).
No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action.
To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.
In addition, borrowers who are employed by non-profits, 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. This is because of time-limited changes that waive certain eligibility criteria in the PSLF program. These temporary changes expire on October 31, 2022.
Nearly every Pell Grant recipient came from a family that made less than $60,000 a year, and Pell Grant recipients typically experience more challenges repaying their debt than other borrowers. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief.
The Pell Grant program is one of America’s most effective financial aid programs—but its value has been eroded over time. Pell Grant recipients are more than 60% of the borrower population. The Department of Education estimates that roughly 27 million borrowers will be eligible to receive up to $20,000 in relief, helping these borrowers meet their economic potential and avoid economic harm from the COVID-19 pandemic.
Current students with loans are eligible for this debt relief.
Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.
If all borrowers claim the relief they are entitled to, these actions will:
- Provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.
- Target relief dollars to low- and middle-income borrowers. The Department of Education estimates that, among borrowers who are no longer in school, nearly 90% of relief dollars will go to those earning less than $75,000 a year. No individual making more than $125,000 or household making more than $250,000 – the top 5% of incomes in the United States – will receive relief.
- Help borrowers of all ages. The Department of Education estimates that, among borrowers who are eligible for relief, 21% are 25 years and under and 44% are ages 26-39. More than a third are borrowers aged 40 and up, including 5% of borrowers who are senior citizens.
- Advance racial equity. By targeting relief to borrowers with the highest economic need, the Administration’s actions are likely to help narrow the racial wealth gap. Black students are more likely to have to borrow for school and more likely to take out larger loans. Black borrowers are twice as likely to have received Pell Grants compared to their white peers. Other borrowers of color are also more likely than their peers to receive Pell Grants. That is why an Urban Institute study found that debt forgiveness programs targeting those who received Pell Grants while in college will advance racial equity.
The statement said the Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief.
The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year.
Nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.
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