President Joe Biden has announced sweeping measures to lift a large weight off millions of low- and middle-income student loan borrowers by relieving debt and reforming the student loan system. <\/p>\n
This announcement offers targeted debt relief to lower- and middle-income families as part of a comprehensive effort to address growing college costs.<\/p>\n
The administration will provide $20,000 in debt relief to borrowers who received Pell Grants while they were in college. To qualify, a borrower’s annual income must be less than $125,000, or $250,000 if they are part of a household. Borrowers who are not Pell Grant recipients but who meet those income thresholds will be eligible to receive $10,000 in relief.<\/p>\n
Current students with loans are eligible for this debt relief. Dependent students will be eligible for relief based on their parental income rather than their own income.<\/p>\n
The Department of Education estimates that roughly 27 million borrowers will be eligible to receive up to $20,000 in relief, helping them meet their economic potential and avoid economic harm from the Covid-19 pandemic.<\/p>\n
The Department of Education will set up a simple application process for borrowers to claim relief. <\/p>\n
To ensure a smooth transition to repayment and prevent unnecessary defaults, the moratorium on federal student loan payments will be extended one final time through December 31.<\/p>\n
The Department of Education intends to reform the income-driven repayment system.<\/p>\n
The proposed rule for undergraduate loans would cut in half the amount that borrowers have to pay each month from 10 percent to 5 percent of discretionary income. They’ll also raise the amount of income that is considered non-discretionary and therefore protected from repayment, guaranteeing that no borrower earning under 225 percent of the federal poverty level will have to make a monthly payment.<\/p>\n
For borrowers with loan balances of $12,000 or less, the proposed rule will forgive loan balances after 10 years of payments instead of 20 years.<\/p>\n
Since 1980, the total cost of both four-year public and private college students has nearly tripled, the White House said in a fact sheet.<\/p>\n
The skyrocketing federal student loan debt burden, estimated at $1.6 trillion, for more than 45 million borrowers is a financial weight on American middle class. Middle-class borrowers struggle with high monthly payments and ballooning balances, with one in six borrowers in default and many unable to complete their degree because the cost of attendance was too high. <\/p>\n