President Joe Biden announced today that the United States government will forgive up to $10,000 in federal student loan debt for borrowers who make $125,000 or less annually. For Pell Grant recipients, the forgiveness amount can be up to $20,000. And for married couples, those who earn $250,000 a year or less combined and file their taxes jointly can qualify for up to $10,000 of cancelled debt per partner. The announcement comes as a welcome promise of relief for alumni who are struggling to pay off mounting student debt.
In a tweet Wednesday morning, the president said that he will also continue the pause on federal student loan payments through December 31, 2022, which began during the COVID-19 pandemic. Payments will be postponed automatically for borrowers and will resume in January 2023. Federal student loan holders haven’t been required to make payments since March 2020, when former President Donald Trump signed the CARES Act to pause payments and prevent interest from mounting while the U.S. and its citizens dealt with the economic fallout of the COVID-19 pandemic.
In his remarks Wednesday afternoon, President Biden elaborated that the loan forgiveness amounts will be higher for those with lower incomes, and that going forward, borrowers can cap their payments at 5% of their monthly income. Excess interest will also end with the new policy — as long as you’re still making your monthly payment (again, capped at 5% of your monthly income), your income amount shouldn’t increase.
The White House’s statement about this forgiveness initiative says that the average undergraduate student leaves college with $25,000 of debt, according to a Department of Education analysis. This debt makes it hard for young Americans to “build wealth,” it adds, by investing in buying homes or starting their own businesses. The statement also acknowledged that “the student debt burden also falls disproportionately on Black borrowers.”
But the $10,000 forgiveness isn’t the only part of the student loan plan. There will also be a policy that ends “excess interest” on student loans.
How to tell if you qualify for student loan forgiveness.
In order to receive loan relief, most borrowers won’t have to do anything. The Department of Education has the necessary income data for the majority of borrowers already. If you are unsure if they have your data, the Department will release an application for loan forgiveness “in the coming weeks.”
Moving forward, the Biden-Harris Administration is also proposing a new rule “to reduce future monthly payments for lower- and middle-income borrowers.” While it’s not yet in place, that rule could forgive loan balances under $12,000 after 10 years of payments instead of 20, prevent interest from accruing as long as monthly payments are made, and more.
To receive email updates about the loan forgiveness program, like when that application becomes available, sign up for email updates from the Department of Education.
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