WASHINGTON — President Biden has announced a new round of federal student loan debt relief, saying he is cancelling $10,000 in debt for those earning less than $125,000 per year and $20,000 for those who had received Pell grants for low-income students.
The debt forgiveness comes after months of discussions and follows by a day an announcement of plans to provide debt cancellation for more than 175,000 people who will receive about $10 billion through a government program designed to encourage people to work in public service.
“All of this means people can start finally to climb out from under that mountain of debt,” Biden said making the new announcement. “To finally think about buying a home or starting a family or starting a business. And by the way, when this happens the whole economy is better off.”
In addition, the president announced that a pandemic-era pause on student loan payments, which has been in effect since March 2020, would expire at the end of the year.
Analysts are saying they expect the debt relief plan will almost certainly face legal challenges, making the timing of any relief uncertain.
According to data cited by the New York Times, across the United States, 45 million people owe $1.6 trillion for federal loans taken out for college — more than they owe on car loans, credit cards or any consumer debt other than mortgages.
Who’s Getting What
According to the White House, students who received Pell grants will be eligible for $20,000 in debt forgiveness. Around 60% of borrowers have received Pell grants, and the majority come from families making less than $30,000 a year. The Education Department said it estimates that 27 million borrowers will qualify for up to $20,000 in relief.
In addition, millions of other borrowers will be eligible for $10,000 in debt relief as long as they earn less than $125,000 a year or are in households earning less than $250,000. Current students are also eligible for the debt relief; if they are dependents they will be assessed based on their parents’ income, according to the government.
Borrowers will be assessed based on the income they reported in 2021 or 2020.