President Biden’s Federal Student Loan Policy: What You Need to Know

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When President Joe Biden officially entered the White House, one of his most anticipated initiatives involved the cancellation of student loans. During the election campaign, he made promising statements about university debt and pledged to forgive a portion of federal student loan debt for borrowers. Since August 2022, Biden canceled about $32 billion in debt for certain groups, and now he announced that it forgives up to $10,000 in student loan debt for those who earn less than $125,000 per year and up to $20,000 for those who were Pell Grant recipients and earn less than $125,000 per year.

Due to the financial pressure of the pandemic, payments have been suspended since March 2020, which means that borrowers have been able to temporarily suspend payments or make smaller payments for more than two years. While the freeze was set to expire on August 31, the Biden administration also announced on Wednesday that the payment break has been extended until December 31. This will be the last expansion.

As the administration’s pardon plan rolls out and payments are expected to restart in about four months, here’s everything you need to know about Biden’s federal student loan policy, which he’s embraced so far and how its forgiveness policy affects you.

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washington, dc december 15th activists call on president biden not to resume student loan repayments in february and cancel student debt near the white house on december 15, 2021 in washington, dc photo by paul morigigetty images for us , the 45 million
Paul Morigi//Getty Images

So how many people are affected by student loan debt?

This is estimated by the Federal Reserve that the national student loan debt reached more than $1.7 trillion in the second quarter of 2021. This means that approximately 43 million student borrowers are in debt, according to statistics from the Education Data Initiative.

What does Biden’s August 24 executive order on loan forgiveness mean?

On Wednesday, August 24, President Biden announced he would forgive up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 a year. For those who received a PellGrant — a form of federal financial aid — and earn less than $125,000 a year, up to $20,000 in student loan debt will be forgiven.

This forgiveness plan only applies to federal student loans. Private loans are not eligible.

Biden’s plan also caps monthly payments for undergraduate loans at 5% of the borrower’s income, up from 10%.

What is my next step if I qualify for loan forgiveness?

According to a White House statement, the Department of Education will establish an application process for qualified borrowers to apply for relief.

“The app will be available no later than when the pause on federal student loan repayments ends at the end of the year,” the statement said. “Almost 8 million borrowers may be eligible to automatically receive relief because their relevant income data is already available to the Department.”

It’s also a good idea to double-check all your personal and contact information on your loan agent’s website, and keep an eye out for any communication or advice from them.

Who has Biden canceled loans to so far?

President Biden canceled about $32 billion in federal student loans among the following groups: borrowers defrauded by their schools, borrowers on total and permanent disability and borrowers who work in the public sector.

Borrowers who attended now non-existent schools were the first to benefit from the loan forgiveness initiative. This was intended to help those who attended a school that engaged in illegal activities or “other misconduct in violation of certain state laws.”

The second group consisted of borrowers who were recorded as having a “total and permanent” disability by social security administration.

The third and final group to receive loan relief were government and nonprofit employees. It was granted under the Public Service Loan Cancellation Program (PSLF), which required borrowers to be employed full-time by the government or a non-profit organization, be enrolled in a repayment plan and have already made 120 payments on time. A redesign of this program immediately wiped out the loans of 22,000 borrowers, according to the Ministry of Education.

Why have federal student loan repayments been suspended?

The extraordinary financial pressure caused by COVID-19 prompted then-President Trump to suspend monthly student loan payments until September 30, 2020. It was subsequently extended several times and was due to expire on August 31. But now, the refund relief will continue until December 31.

“Borrowers should plan to resume payments in January 2023. As the economy continues to improve, COVID cases remain at high levels, and the President has made it clear that pandemic-related relief should be phased in gradually. responsibly removed so people don’t suffer unnecessary financial trouble. wrong,” the U.S. Department of Education said in a statement August 24.

Although there is more time, borrowers should check with their loan officer to ensure they are as ready as possible to make payments in January 2023.

washington, dc december 15 activists hold festive signs calling on president biden to cancel student debt and not take over student debt as musicians play upbeat music, saluting white house staff as they arrive at work on December 15, 2021 in washington, dc photo by paul morigigetty images for us all 45 million

Paul Morigi//Getty Images

What do other legislators think?

Although Biden is keeping his campaign promise to cancel at least $10,000 in federal student debt, some Democratic lawmakers such as Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer have urged the administration to increase $50,000 cancellation policy. Others called on the president to completely cancel student loan debt for all. In an April 5 tweet, Sen. Bernie Sanders of Vermont simply wrote, “Cancel student debt. All of this.

New York Rep. Alexandria Ocasio-Cortez echoed a similar sentiment and expressed on social media that repeatedly extending the break isn’t the answer: “I think some people are reading these extensions as a policy wise but I don’t think these people understand the panic and turmoil it causes people to get so close to these timelines just to prolong the uncertainty it doesn’t have the effect that people think it a. We should cancel them,” she wrote.

In a letter to President Biden on December 8, 2021, Schumer, Warren and Rep. Ayanna Pressley expressed concern: “Before the COVID-19-related payment pause, student borrowers were paying an average of $393 a month for their student loans — money that couldn’t be spent. for other family needs. ”

“Pausing federal student loan repayments, interest, and collections has improved economic security for borrowers, allowing them to invest in their families, save for emergencies, and pay off other debts. Restarting payments without canceling student debt will jeopardize the economic progress of these families,” the letter continues.

washington, dc february 4 senate majority leader chuck schumer d ny speaks during a news conference on student debt outside the us capitol on february 4, 2021 in washington, dc also pictured, lr , rep world jones d ny, rep alma adams d nc, rep ilhan omar d mn, sen elizabeth warren d ma and rep ayanna pressley d ma the group of democrats presented their resolution calling on president joe biden to take executive action to rescind up to $50,000 in debt for federal student loan borrowers photo by draw angergetty images

Drew Angerer//Getty Images

On the other side of the aisle, Republican lawmakers are resisting any attempt to write off student loans altogether.

After Biden’s August 21 announcement, Senator Mitt Romney tweeted“Biden’s student loan forgiveness plan may win votes for Democrats, but it fuels inflation, forces taxpayers to pay other people’s financial obligations, is unfair to those who have paid their own way, and creates expectations irresponsible.”

In September 2021, Representatives Ted Budd, Warren Davidson, Scott Perry and Barry Loudermilk wrote to Education Secretary Miguel Cardona“The law is clear: the Department does not have the legal authority to write off student loan debt en masse… Mass write-off of student loan debt would not only be a clear violation of the separation of , but would also be an affront to the millions of borrowers who have repaid their loan balances responsibly.

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