President Joe Biden announced plans to cancel $10,000 in student loan debt for Americans earning less than $125,000 per year on Wednesday. Biden also extended the pause on loan payments until the end of the year. The president’s actions on student loans also includedrestructuring payments for those with undergraduate loans.
“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle-class families breathing room as they prepare to resume federal student loan payments in January 2023,” the White House tweeted Wednesday. The president is scheduled to deliver a speech on the plan at 2:15 p.m. ET.
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The plan includes $20,000 in debt cancellation for those with Pell Grant loans held by the U.S. Department of Education and up to $10,000 in debt cancellation for those with non-Pell Grants. Borrowers are only eligible for these debt cancellations if their individual income is under $125,000or if their household income is under $250,000.
Borrowers who work for non-profits, the military, or federal, state, Tribal, or local governments could be eligible to have all their student loans forgiven under the Public Service Loan Forgiveness (PSLF) program. Borrowers must apply for this at PSLF.gov by Oct. 31.
The last part of the White House’s plan is a restructuring of how student loans are paid. A new rule changes the income-based repayment programs. Borrowers will be required to pay no more than 5% of their discretionary monthly income for undergraduate loans, half as much as previously required under most income-driven repayment plans. The amount of income considered non-discretionary income will climb, guaranteeing “no borrower earning under 225% of the federal poverty level about the annual equivalent of a $15 minimum wage for a single borrower-will have to make a monthly payment,” according to the White House. Loan balances will also be forgiven after 10 years of payments for borrowers with loan balances of $12,000 or less. Borrowers’ unpaid monthly interest will also be paid, meaning the balance will not grow as long as the monthly payments aren’t missed.
The Department of Education estimates that almost 8 million borrowers will see their student loan debt forgiven automatically. Others will have to apply if the Department of Education does not have their income data. A simple application will be launched in a few weeks, the White House said. The application will launch before the federal student loan repayments pause ends on Dec. 31. Borrowers can sign up for email updates on the app at the Department of Education’s website.
