President Biden’s Student Loan Relief Plan and What It Means for You
Student loan debt is a harsh reality for nearly 50 million college graduates in America. There was a time when a college degree all but promised a living wage and a middle-class lifestyle, but with the cost of education and cost of living constantly on the rise, it is becoming increasingly difficult for college graduates to achieve financial independence as they struggle to make regular student loan payments that essentially equate to a month’s rent in some cases.
Let’s go over some statistics with regards to student loan debt in America. Of the nearly 50 million Americans who currently have student loan debt, 45.5 million of them owe on federal loans. As of the first quarter of 2022, 5 percent of student loans were delinquent for a period of 90 days or more. Of course, this could be due in part to challenges associated with the Covid-19 pandemic, as many people lost their jobs due to businesses closing down either temporarily or permanently, or because of smaller businesses being forced to downsize in order to survive. The bottom line is, student loan debt was a problem even before the Covid-19 pandemic came into play and wreaked havoc on anything and everything. As of the present, there is almost $2 trillion in total student loan debt in America. Yikes.
Recently, President Biden announced a new, three-part plan that is designed to provide relief to borrowers as they begin to recover from economic hardships associated with the Covid-19 pandemic. The first aspect of the plan is to provide targeted debt relief to all individual borrowers who make less than $125,000 per year. Those who qualify will receive up to $10,000 in debt cancellation from the Department of Education. Individuals who have received Pell Grants and who also qualify for the relief will receive up to $20,000. Additionally, federal loan repayments will be paused through December 31, 2022. The White House has stated that this is the final extension on the student loan pause, and that borrowers should expect to resume making student loan payments in January 2023.
The next component to President Biden’s plan includes lowering monthly payments for student loan borrowers. A newly proposed income-driven repayment plan will protect low-income borrowers from making student loan payments, and will cap monthly payments for those paying undergraduate loans at 5 percent of their discretionary income. Under the new repayment plan, the average annual student loan payment will be around $1,000 less for current borrowers, as well as for future borrowers.
Additionally, the proposed repayment plan will have a positive effect on those who have worked in the non-profit sector, held a position in federal, state or local government, or who have served in the military, due to changes to the Public Service Loan Forgiveness (PSLF) program being implemented by the Department of Education. As of the present, more than $10 billion in student loan debt has been forgiven for almost 200,000 public servants.
Rounding out the relief plan, President Biden hopes to reduce the cost of college for future students. The President will seek to make Pell Grants more attainable, while working to make community college education entirely free. Further, private universities will be obligated to keep their prices reasonable while providing high quality education and facilities. Universities will also be held accountable through a program in which an annual watch list will be published, detailing which university programs are the worst offenders with regards to putting graduates into crippling debt. This will help prospective students to better decide which programs are best for them and their individual circumstances.
So, what does all of this mean for you? If you’re a recent graduate with student loan debt, you can take advantage of the benefits of President Biden’s plan as long as you qualify. If you’re considering attending college, you’ll have a variety of options at your disposal to make the entire endeavor more affordable. The Department of Education is currently devising a simple, efficient application process—you can be sure we’ll provide updates on said application process as they become available, so keep it dialed in here. For now, we can all look forward to positive changes in the way we deal with college tuition and student loan repayment. Hopefully, this will be the beginning of a paradigm shift towards more affordable higher education across the board.