Under the long-awaited forgiveness plan President Joe Biden unveiled on Wednesday, more than 40 million Americans may see their student loan debt lowered — and in many cases cancelled — in a historic but polarising move ahead of the midterm elections.
Biden is wiping $10,000 in federal student loan debt for those with incomes under $125,000 annually or for households making less than $200,000 in order to make good on a campaign promise. For individuals who got federal Pell Grants to attend college, he is cancelling an extra $10,000.
It is seen as a ground-breaking effort to stem the tide of America’s rapidly rising student debt, but it ignores the bigger problem of the high expense of college.
Republicans swiftly condemned the plan as an insult to both non-college goers and Americans who had paid off their debt. Political opponents from all sides of the aisle questioned Biden’s authority for the action, and legal challenges are almost certainly forthcoming.
For what he called the “last time,” Biden also extended a suspension on payments for federal student loans. The suspension will now last until the end of the year, with repayments starting up again in January.
“Both of these targeted actions are for families who need it the most: working and middle class people hit especially hard during the pandemic,” Biden said at the White House Wednesday afternoon.
Federal student loans taken out for undergraduate and graduate study, as well as Parent Plus loans, are all affected by the cancellation. If their loans were granted before July 1, then current college students are eligible. The family income of dependent students’ parents must be less than $250,000.
For the vast majority of people, relief must be requested. Only a small portion of borrowers have income information available to the Education Department; the vast rest will need to submit documentation to confirm their salaries. Applications will be made accessible before the year is over, according to officials.
According to the government, 43 million borrowers would be eligible for some form of debt forgiveness under Biden’s plan, with 20 million potentially qualifying for full debt cancellation. The federal Pell Grant is given to undergraduate students with the greatest financial need, and over 60% of borrowers qualify, providing more than half with a $20,000 benefit.
The 29-year-old media strategist from New York City, Sabrina Cartan, anticipates having her entire federal debt forgiven. It was $9,940 when she looked at the balance on Wednesday.
With Biden’s idea, Cartan will be able to assist her parents in repaying the additional thousands they borrowed for her education. Cartan used the loans to attend Tufts University. She described it as a “levelling moment” for her as a first-generation college student.
“I know there are people who feel that this isn’t enough, and that is true for a lot of people,” said Cartan, who already has repaid about $10,000 of her loans. “I can say for me personally and for a lot of people, that is a lot of money.”
