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President Joe Biden on Americans gave up to $10,000 in federal student loan debt forgiven. That amount increases to $20,000 if they went to college on Pell grants. Here’s what we know so far and what it means for people with outstanding student loans:
Biden plans to forgive up to $10,000 in federal student loan debt for anyone who makes less than $125,000 a year. Pell grants people, which are reserved for undergraduates with the most significant financial need, can have up to $20,000 forgiven.
Biden’s tweet said the payment freeze will be extended one last time, until Dec. 31. The freeze started in 2020 as a way to help people struggling financially during the COVID-19 pandemic and it’s been extended several times since. It was set to expire on Aug. 31.
Borrowers whose loans aren’t forgiven or are only partially forgiven should plan to resume loan payments in January. Biden explained that though COVID-19 cases remain elevated, as the economy improves, pandemic-related relief should be phased out responsibly.
Another feature of the loan relief plan is that it caps undergraduate loan payments to 5% of a borrower’s monthly income, as opposed to the previous 10% threshold.
Additionally, the plan forgives loan balances of $12,000 or less after 10 years of payments, instead of the current 20 years. It also fully covers the borrower’s unpaid monthly interest, so that unlike with current income-driven repayment plans, a borrower’s loan balance won’t grow as they are making their required monthly payments.
Americans currently owe about $1.62 trillion in federal student loans. Biden's plan will provide relief to most of them – 43 million borrowers – and will completely erase the student debt of about 20 million.
But who qualifies?
Individuals with federal student loans who make under $125,000 per year, or couples earning less than $250,000, qualify for up to $10,000 in forgiveness.
That includes current students: Borrowers who are dependent students will be eligible for relief based on their parents' income. Parent PLUS loans, which are federal loans for parents of undergraduate students, are also eligible under the president's plan. (Loans taken out after June 30, 2022, will not qualify.)
Qualified borrowers who received Pell Grants are eligible for additional relief – up to $20,000.
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#college #studentloans #financialaid
