Biden Student Loan Forgiveness Plan
Today, Vice President Biden took historic action to address student loan debt. Further details will be announced in the coming weeks, but the plan will provide $20,000 in Pell Grant debt relief for beneficiaries of Pell Grants a federal grant program for undergraduate students with the lowest economic need and $10,000 for Pell Grant beneficiaries who did not receive any.
This cancellation is only suitable for borrowers making less than $125,000 or $250,000 for married couples and will be automatic for as many as eight million borrowers.
In addition, the cancellation of student loan payments is extended one time through December 31, 2022.
The Center for American Progress has called on the Biden administration to cancel at least $10,000, and has encouraged the president to withdraw from administrative positions by making the data in the federal government readily available to guarantee cancellation for borrowers.
This is an ambitious step for the educational system and will be of great value to the community and its citizens all over the country.
How Would Biden’s Plan Shrink Discretionary Income?
The intention is to increase the overall amount of income considered nondiscretionary, which is the income needed to finance necessary expenses including taxes, food and shelter, and protect from repayment.
The White House says it’s making it a point that no individual earning below 225% of the federal poverty level around the previous year’s equivalent of $15 minimum wage will need to make a payment each month.
What Else Is Being Proposed That’ll Cut My Monthly Repayments To Make Them More Manageable?
The other major piece of relief is achieved through cutting the amount of money you devote to discretionary spending every month.
The weighted average interest rate that borrowers have on undergraduate and graduate loans would come down.
Debt Cancellation Will Help Millions Of Student Loan Borrowers
Approximately 43 million Americans own more than $1.6 trillion in federal student loan debt. This burden of debt is largely due to the remarkable rise in the cost of college, state governments cutting funding, and federal aid falling short.
For example, 73 percent of Pell Grant recipients also took out loans, showing that available grant money is not keeping up with the cost of college. These borrowers come from all walks of life, age groups, and political backgrounds.
As a result, many borrowers have had to make a choice between paying down their student debt and paying rent, health care, child care, and other basic needs.
The cancellation of a lot of student loan debt has dramatically lowered or completely wiped out the debt of millions of borrowers.
Debt Cancellation Will Help Narrow The Racial Wealth Gap
Black students and their families are more likely than other members of the population to need to borrow, borrow more, and take longer to pay off their loans.
Black undergraduate students are also much more likely than students in other ethnic groups to be eligible for a Pell Grant, which evidences their severe financial need.
For these reasons, President Biden’s debt cancellation action is a significant first step in narrowing the racial wealth gap.
Debt Cancellation Is Just One Piece Of The President’s Announcement to Tackle Student Debt
In addition to promoting historic debt relief for debtors, the president also stated effective reforms to federal student aid that will significantly improve the repayment process for borrowers.
By improving income-driven repayment (IDR) and public service loan forgiveness (PSLF), the administration hopes to safeguard the access to education as a stepping-stone to financial opportunity.
This historic statement from Joe Biden on abolishing student debt is only one piece of the more comprehensive approach to address the nation’s student debt crisis.
At the core of the debt cancellation movement is the idea of no one should have to take on crippling debt to gain access to universities and colleges and all of its social, economic, and educational advantages.
Actions by the Biden administration alone will not solve the problem of the student debt crisis, but they must seize this opportunity of intense concern.
As CAP recently reported, lawmakers and the Biden administration must act now to stem one of the pressing issues of our time.