President Joe Biden Announces Student Debt Relief Plan

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Photo by David McNew via Getty Images

By Sadie Larios 

 

WASHINGTON, D.C.—Last month, President Joe Biden announced his three-part Student Debt Relief Plan to cancel student debt for low- and middle-income borrowers which, along with the Public Service Loan Forgiveness program, will be the start of tackling the issue of student debt.

 

Before the Student Debt Relief Plan, President Biden had been vocal about his opinions on the importance of education for the American people, expressing his belief that post-high school education should lead to the opportunity to enjoy a middle-class life, but because of the exorbitant cost of loans, many borrowers are left deprived. 

 

In the United States, as of 2022, student loan borrowers owe an estimated 1.75 trillion dollars in debt among 48 million borrowers.

 

Since 1980, the cost of four-year public or private education has almost tripled. 

 

Pell grants used to cover 80% of the cost to attend college, but even with the cost of post-high school education increasing, federal support has not kept pace. 

 

The average borrower is left with almost 30,000 dollars in debt with payments of 300 dollars a month ranging over 10 years.

 

After the pandemic worsened costs, President Biden announced this plan to create a foundation for further student debt relief and begin to tackle the student debt crisis.

 

Biden’s plan extends the student loan pause repayment plan which first began when Biden took office in 2020 and put loan payments on hold due to the pandemic.

 

The expected first part of Biden’s plan is the final extension of the student loan repayment pause, pushing the repayment pause to Dec. 31, 2022, with payments resuming in January 2023. 

 

The second part of the plan is targeting debt for low- and middle-income families whose income is less than 125,000 (250,000 for married couples). Borrowers that fall within that range can have up to 10,000 dollars to be canceled if they are a non-Pell Grant recipient and 20,000 for Pell Grant Recipients. 

 

Even if an individual has received the Pell Grant once, that 10,000 dollars relief can still be applied. 

 

For borrowers employed by nonprofit organizations, the military, federal, state, or local governments may be eligible to have all their student loans forgiven. 

 

Part three of the plan is to make the student loan system more manageable for current and future borrowers by proposing a new rule that will create an income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers. Under the rule, borrowers will not pay any more than 5 percent of discretionary income on loans, and the amount of money that is considered discretionary income when applying will be raised. 

 

Lowering the standard payment of 10 percent to 5 percent also means that it will be cutting repayment time from 20 years to 10, so for borrowers that make $15 an hour, this new rule will allow them to never have to make another payment.

 

Along with reduced payments, the rule would also cover unpaid monthly interest as long as the borrower makes their monthly payments their debt will not grow.

 

The Public Service Loan Forgiveness Program made the Student Debt Relief Plan inclusive of multiple types of loans that were disbursed before June 20, 2022. Eligible loans are undergraduate and graduate loans, parent PLUS and grad PLUS loans, consolidation loans, FFEL loans, Perkins loans, and Defaulted loans. 

 

Because the Student Debt Relief Plan allows many loans to be eligible, it will provide relief for at least 43 million borrowers and even cancel any debt for 20 million borrowers accruing over 400 billion dollars.

 

The White House has stated that this plan is not meant to solve all issues revolving around student debt, but is meant to take admirable steps toward helping college graduates.

 

These steps include giving low- to middle-class borrowers a chance at buying a home, starting a business, and even saving money for retirement. There’s also the American Rescue Plan, in which President Biden has already given almost $40 billion to colleges and universities in 2021 before the Student Debt Relief Plan.

 

Additionally, the Department of Education has announced that they will take actions to hold colleges accountable that have been involved in profit scandals and have contributed to the student debt crisis. One way they plan to do so is by publishing a watchlist of schools that students can avoid that are involved in scandals or that tend to leave students with high debt.

 

The student debt crisis is an issue that has only worsened with inflation and economic effects of the pandemic, but President Biden’s new plan is a first step in the direction of combating high student debt in America. 

 

For students dealing with student loans and debt, the first step to receiving student debt relief is finding out eligibility and where to apply. 

 

Once the Department of Education Subscription page releases more information beginning in early October eligible borrowers will be able to apply before the deadline on Dec. 31, 2023.

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3 thoughts on “President Joe Biden Announces Student Debt Relief Plan”

  1. Keith Olson

    This is not a big hit with the voting public.  Sure some college students are happy with it because their debt got laid off on the public at large.   But people who paid off their students loans and didn’t buy that car or boat in order to, or entered the military on the GI Bill and gave up years of their life, or students who worked their way through college while others took loans, etc. are not at all happy about this and will be voting accordingly.

    1. Walter Shwe

      Voters who care about the future of democracy, Medicare and Social Security will vote accordingly. Voters that care about not giving enormous tax cuts almost solely for the rich will vote accordingly.

  2. David Greenwald

    I think Keith is partially right but he is missing a huge point.

    This is from a few weeks ago, but you see how much it moved opinion in the under 30 group.

    And yes, it’s a small group of people relatively speaking, but people looking at polls need to understand the impact of salience – this is an issue that resonates with one group of people and probably will not move other groups.

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