On Wednesday, Vice President Joe Biden unveiled his plan to handle the issue of student loan debt, which includes debt forgiveness for certain borrowers and an extension of the payment suspension that was tied to the pandemic.
By extending forgiveness programs for public-sector workers, disabled borrowers, and students who were conned by for-profit colleges, the Biden administration has already cancelled nearly $32 billion of the $1.6 trillion in outstanding federal student debt. This brings the total amount of forgiven debt to nearly $32 billion.
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The following are the specifics that CNN has received about the new proposal proposed by Biden, including the amount that will be forgiven and the people who are qualified to receive it.
What kind of forgiveness will they receive?
The borrower’s eligibility for debt cancellation is determined by whether or not they were awarded a Pell grant to help pay for their education. Only undergraduate students who “display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree” are eligible to receive a federal Pell grant, which “does not have to be repaid, except under certain circumstances,” according to the Federal Student Aid office of the Department of Education. According to data provided by the White House, Pell grants presently only cover a third of the cost of a four-year public college degree, which has led to an increase in the amount of money that students have to borrow.
According to the information provided on the FSA website, borrowers who did not receive a Pell grant while they were undergraduate students are eligible to have up to $10,000 of their federal student loan debt discharged if they make less than $125,000 annually as individuals or less than $250,000 annually as married couples or heads of households.
If an individual borrower has an annual income of less than $125,000 and married couples or heads of households have an annual income of less than $250,000 and did earn a Pell grant while they were an undergraduate student, then they could have up to $20,000 of their student loan debt forgiven.
What are the necessary actions for potential borrowers to take?
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According to FSA, due to the fact that the Department of Education already has their income information on file, there is a possibility that almost 8 million borrowers will be eligible for automatic debt forgiveness.
The application that will allow borrowers to enter their income information or to determine whether or not the department currently has their income information will be made available by the Biden administration within the next few weeks. According to FSA, the application will be accessible prior to the expiration of the grace period for the repayment of federal student loans on December 31.
