Earlier this week, big news swept the nation as President Biden announced his plans regarding student loan forgiveness. Loan forgiveness was a campaign promise that Biden spoke about when he was making his 2020 presidential run. Although this is can be seen as a huge relief for student loan borrowers, there are a few requirements that have to be met and details that need to be discussed.
Forgiveness To Those Who Need It Most
Up to $10,000 will be forgiven for student loan borrowers who are under a certain income threshold. Taxpayers who file individually and make $125,000 or less will be eligible for the $10,000 of forgiveness on their loans. Those filing as married, and earning less than $250,000 collectively will also be eligible for the forgiveness of $10,000.
Pell Grant Recipients to Receive More
Some student loan borrowers received a grant known as the Pell Grant. The Pell Grant is reserved for undergraduate college students that need the most financial assistance. The Biden administration vowed an additional $10,000 in forgiveness to all borrowers who were Pell Grant Recipients. This means borrowers that received that grant will receive a total of $20,000 towards the forgiveness of their student loans so long as they qualify.
Statement From the President
In a statement coming from the president that was made just two short days ago, Biden said, “Both of these targeted actions are for families who need it most: working-class and middle-class people hit especially hard during the pandemic.”
Final Pause of Student Loans
The President also made clear that the pause he just put on student loan payments will be the “final time” he will put a moratorium on payments. The pause he announced will run until the end of 2022, but, it is likely that we will not see another moratorium after the latest one comes to an end.
Federal Data
According to data provided by the federal government, roughly 43 million Americans owe federal student loans. The average amount of money owed is $37,667. Around a third of federal student loan borrowers owe less than $10,000, while roughly 50 percent of all borrowers owe less than $20,000 in federal loans. According to the Biden administration, this loan forgiveness will completely erase student loan debt for roughly 20 million borrowers.
As stated by the president during his announcement, “That’s 20 million people who can start getting on with their lives. All this means, people can start to finally crawl out from under that mountain of debt. To get on top of their rent and utilities. To finally start thinking about buying a home or starting a family or starting a business.”
Wrap Up
While some think this is great news and deliverance on Biden’s campaign promise, others are very dissatisfied with the announcement. When the president was making his 2020 presidential run, he vowed for total cancelation of student debt. While this may be a start towards his goal, for the time being, it gives some breathing room to people who need it most. There are still a lot of borrowers who are being left behind and will have to start paying up when the moratorium ends at the start of 2023.
If you are unsure if you or your family fall into the student loan forgiveness threshold, call your accountant or advisor today.