A plan to help American families deal with the high cost of college and student loan debts is being put in place, President Joe Biden announced Wednesday, following through on a campaign promise.
Under the new initiative, the Department of Education will:
- Provide targeted debt relief to address the financial harms of the pandemic. The department will provide up to $20,000 in debt cancelation to Pell Grant recipients with loans held by the department and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 – $250,000 for married couples. In addition, the pause on federal student loan repayment will be extended through Dec. 31. Borrowers will resume payment in January 2023.
- Make the student loan system more manageable for current and future borrowers by cutting monthly payments in half for undergraduate loans. The department is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5 percent of a borrower’s income – half of the rate that borrowers pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers.
- Fix the broken Public Service Loan Forgiveness program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government receive credit toward loan forgiveness.
- Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike prices.
“Today is a great day,” Sen. Elizabeth Warren (D-Mass.) said in a Twitter message. “20 million Americans will never have to make another student loan payment. Another 23 million Americans will have significant relief on their student loans. This is about helping America’s middle class and providing relief to those who need it most.”
Forty million Americans owe a total of about $1.7 trillion in student loan debt.
