By: Dalet Valles
Published By: The Chimes Newspaper
On Aug. 26, the Biden Administration announced a three-part plan to provide loan forgiveness to millions of students and graduates around the country. According to Forbes, student debt totals an estimate of $1.75 trillion, attributed to around half the population.
The debt forgiveness plan will provide relief to those who are continuing their education along with those who have completed their desired degree. In order to earn a degree, many put themselves in a position of debt.
LET’S TALK MONEY
After a long-anticipated decision, the Biden Administration launched a plan that will aid low and middle-income families with student loan debt. The first step in the three-part plan provides ‘targeted debt relief.’ Pell Grant recipients with outstanding federal loans can expect up to $20,000 in loan forgiveness. As of now, these recipients make up more than an estimated 60% of loan borrowers.
Some non-Pell Grant recipients can expect to receive up to $10,000 in cancellation. To be eligible for debt cancellation, individual recipients must have an income of $125,000 or less. Borrowers who are married will receive relief if the household income is $250,000 or less. If borrowers are claimed as dependents, relief will be estimated utilizing parental income.
A pause on loan payments has been extended while the plan is set into action. Any borrower with an outstanding balance held by the Department of Education can expect to find relief in payments until December 31, 2022. Payments will resume in Jan. 2023.
As of right now, federal loans make up about 93% of all loans. For federal loans, the average loan total is $37,600. According to the Education Data Initiative, “the average student loan debt growth rate outpaces rising tuition costs by 166.9%.” According to the White House, Pell Grants would cover up to 80% of schooling, but has decreased to only a third at most.
“I think it can be stressful knowing that these loans will be with me beyond my years of college,” said junior kinesiology major Tiana Gomez. “In order to get the education I wanted, at the school I wanted, I knew loans were unavoidable. They are such a burden but this was my only option to get the education I needed, wanted.”
The goal of this plan is to provide relief to student borrowers, present and past. However, this plan also covers future borrowers, aiming for accessibility. The Department of Education proposed a new way to structure loan payments by decreasing the payment cap from 10% to 5% of a borrower’s income. President Biden proposed more affordable college costs, including free community college.
“Students and their families are prudent to evaluate the return on investment of college like other large consumer purchases,” said John Fees, co-founder and managing director of GradGuard, in an interview with CNBC. “This has implications for how institutions operate.”
WHAT TO EXPECT
Student loan forgiveness is expected to roll out automatically, but it is recommended that borrowers apply for the relief once applications are released. In order to qualify, borrowers must have received a loan on or before July 1, 2022. According to CNN, loan relief is said to take four to six weeks to reflect on a borrower’s balance. At this point, former, current and future students will see a significant decrease in loan debt.