President Biden has announced he is canceling $10,000 in student loan debt for those earning less than $125,000 per year and $20,000 for those who had received Pell grants.
Biden also announced that a pandemic-era pause on student loan payments, which has been in effect since March 2020, would expire at the end of the year.
Around 60 percent of borrowers have received Pell grants, and the majority come from families making less than $30,000 a year. The Education Department estimates that 27 million borrowers will qualify for up to $20,000 in relief.
Current students are also eligible for the debt relief. If they are dependents, they will be assessed based on their parents’ income. Borrowers will be assessed based on the income they reported in 2021 or 2020.
Biden also announced changes to the student loan system for current and future borrowers by:
– Cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income. That’s half of the rate that borrowers must pay now under most existing plans.
– Fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a non-profit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness.
– Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices. Biden said he will continue to fight to double the maximum Pell Grant and make community college free. He said the Department of Education will announe new efforts to ensure student borrowers get value for their college costs.
The administration said more information on claiming relief will be available to borrowers in the coming weeks and that borrowers can sign up to be notified when this information is available at: StudentAid.gov/debtrelief.
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