President Joe Biden said on Wednesday that he would erase the student loans of more than one million American students, making it one of the most significant pieces of legislation enacted during his administration.
Not only will he pardon a substantial sum, but he will also prolong the payment freeze that was first imposed due to the epidemic until the end of the year until the end of 2022.
The move comes as the national student debt reached a new high of $1.6 trillion, with more than half of the students paying less than $20,000 to the government. In contrast, the national debt is at $30.7 trillion.
How to Qualify for Joe Biden’s Student Loan Forgiveness?
Joe Biden announced his student loan forgiveness plan in a tweet.
In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.
I'll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
According to a White House announcement, the government will erase $20,000 if the borrower attended college with Pell subsidies, earns less than $125,000 yearly, or the parents/heads of households earn a combined $250,000 annually.
According to the Department of Education Federal Student Aid Office, federal Pell grants are available to undergraduate students who “demonstrate exceptional financial need and have not earned a bachelor’s, graduate, or professional degree” and “does not have to be repaid, except in certain circumstances.”
CNN highlighted recent data indicating that the Pell grant only covers one-third of the total cost of a four-year degree as the reason for the surge in borrowing.
Non-Pell award applicants are eligible for loan forgiveness of $10,000 under Biden’s new student loan forgiveness scheme if they earn less than $125,000 yearly or if their parents/household heads earn less than $250,000 annually.
How Can I Get Joe Biden’s Student Loan Forgiveness?
According to the Federal Student Aid website, the information of more than eight million borrowers is already in the government database, so they would already have the student loan forgiveness reliefs applied to their accounts.
In the coming weeks, the Biden administration will launch a program to collect income data from those whose information has not yet been submitted to the government.
The Public Service Loan Forgiveness program allows borrowers who are currently employed full-time in federal, state, tribal, or local government, as well as the military or a qualifying non-profit organization, to have their remaining student debts forgiven after 120 payments.
When Will Student Loan Repayment Start Again?
As part of his student loan forgiveness initiative, Joe Biden has graciously extended the payment moratorium until December 2022. The Repayment of Student Loans will resume in January 2023.
If Biden’s income-based repayment plan is implemented, borrowers may also feel at peace in the coming months. With this arrangement, the maximum monthly payment for debtors is now capped at 5% of their income, a substantial reduction from the previous barrier of 10%.
In addition, the new plan proposal would increase the tax band for “non-discretionary” income. This could reduce the monthly student loan payment burden for borrowers earning less than 225% of the federal poverty threshold.