Story at a glance
- President Biden’s loan forgiveness plan will cancel up to $10,000 per borrower earning less than $125,000 or families that make less than $250,000 annually.
- Borrowers who received federal Pell Grants and meet the income limits are eligible for up to $20,000 in loan forgiveness.
- Administration officials said Wednesday around 20 million borrowers will see their debt erased if everyone eligible claims the relief.
The Biden administration’s long-awaited student loan forgiveness plan will eliminate student debt for millions of borrowers.
Biden’s plan will cancel up to $10,000 per federal borrower earning less than $125,000 or families that make under $250,000 annually. Borrowers who received federal Pell Grants and meet the income limits are eligible for up to $20,000 in loan forgiveness.
Pell Grants, which have a maximum allowance of $6,895 per academic year, are typically awarded to undergraduate students in serious financial need.
Administration officials said Wednesday around 20 million borrowers will see their debt erased if everyone eligible claims the relief.
“That’s 20 million people who can start getting on with their lives,” Biden said at the White House on Wednesday. “All this means, people can start to finally crawl out from under that mountain of debt. To get on top of their rent and utilities. To finally think about buying a home or starting a family or starting a business.”
Biden’s forgiveness plan will affect borrowers with both undergraduate and graduate loans, Kevin Miller, the associate director for higher education in the Bipartisan Policy Center’s Economic Policy Project, told Changing America in an email.
“The new income-driven repayment plan announced yesterday is only applicable to borrowers with undergraduate loans; and borrowers with a mix of undergraduate and graduate loans who opted into that plan would have their repayment plan weighted proportionally to the amount of undergraduate and graduate debt they have.”
Parents who borrowed for their child’s education will also be eligible for loan forgiveness, Miller added.
“Parent PLUS loans will qualify for the forgiveness; for families where the student received a Pell grant and a parent took on a PLUS loan, that could add up to $30,000 in forgiveness for the family – $20,000 for the student and $10,000 for the parent,” Miller said.
The Education Department said in its announcement that information regarding applications for relief will follow in the coming weeks, but 8 million borrowers whose financial data is readily available could see immediate relief.
“Some borrowers may ‘fall through the cracks’ of income confirmation for various reasons, but hopefully the Department of Education will make every effort to verify incomes so borrowers who are less savvy about computers and bureaucracy aren’t left out, Miller said.
Biden’s plan does not address borrowers who have privately held loans, with a bank or credit union, which accounts for about 13 percent of student borrowers and 8 percent of the nation’s outstanding loan debt — close to $140 billion.
Further, borrowers who received loans after June 30 will not be eligible for forgiveness, White House Domestic Policy Council Director Susan Rice confirmed.
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The administration also announced it is extending the pandemic-related moratorium on student loan payments. It will be the final extension of the pause, which has lasted more than two years and spanned across two administrations. Payments are set to resume in January 2023.
Biden’s forgiveness plan falls short of progressive advocates and lawmakers, including Sen. Majority Leader Charles Schumer (D-N.Y.), who pushed for $50,000 in cancellation. But Schumer praised the president’s action on social media, saying the effort could provide a way toward the middle class for millions.
“For decades, borrowers looking to pursue the American Dream have been held back by a predatory student loan system that turned their dreams into debt—while banks and collectors profited. Today, @POTUS helped right this wrong and helped restore a pathway to the middle class,” Schumer tweeted.
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