US President Joe Biden’s administration Wednesday announced a revised student-loan forgiveness policy. For individuals making less than $125,000 per year, the policy forgives $10,000 in non-Pell Grant federal student loans and $20,000 in Pell Grant federal student loans. Biden also extended through December 31 the previous pause on federal student loan repayments, which was set to expire at the end of August.
Biden announced the new Department of Education executive policy in the midst of increasing pressure from Democrats to cancel a significant portion of federal student loans. As it stands, the cumulative US federal student loan debt is $1.6 trillion spread across more than 45 million borrowers. Biden had previously addressed the crisis of federal student loan repayment by extending a pause on loan repayment instituted under the administration of former president Donald Trump.
The new policy includes three parts: student loan relief, capping monthly payments, and reducing college costs.
The first part, student loan relief has received the most attention, with Senate Majority Leader Chuck Schumer (D-NY) and Speaker of the House Nancy Pelosi (D-CA) lauding the policy.
Canceling student debt lifts a huge burden off millions of Americans and is a major step forward in the fight to end the student debt crisis. Thank you, @JoeBiden!https://t.co/OF6kkGlGQ9
— Chuck Schumer (@chuckschumer) August 24, 2022
.@POTUS’ bold action is a strong step in Democrats’ fight to expand access to higher education.
By delivering historic targeted student debt relief to millions of borrowers, more working families will be able to meet their kitchen table needs as they recover from the pandemic. https://t.co/nHkBLNvqeG
— Nancy Pelosi (@SpeakerPelosi) August 24, 2022
The new policy instructs the Department of Education to provide $20,000 in loan relief to individuals with Pell Grant student loans. Pell Grants are federal loans awarded to students from families that experience more challenges in repaying debts than other borrowers; most Pell Grant recipients’ families make $60,000 or less per year. Every other federal student loan borrower can receive up to $10,000 in loan relief. Both forms of relief are contingent on the fact that the individual receiving the loan relief makes less than $125,000 per year.
The second and third parts of the policy work to make the federal student loan program more manageable for current and future borrowers. For current borrowers, the policy caps monthly payments for undergraduate federal student loans at 5% of the borrower’s income, down from 10%. For future borrowers, the policy promises to double the maximum number of Pell Grants awarded each year and make community college free.
While the policy makes progress towards a Democratic party goal of reducing or eliminating student debt, it has received pushback from Republican representatives. Specifically, Senate Minority Leader Mitch McConnell (R-KY) called the policy a “slap in the face to working Americans” and a “wildly unfair redistribution of wealth toward higher-earning people.” House Minority Leader Kevin McCarthy (R-CA) said the policy “will make inflation even worse and does nothing to stop the runaway cost of college for most families.”
The Biden administration said more information on how federal student loan borrowers can claim relief under the policy will be available in the coming weeks.
