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Biden Announces Student Loan Forgiveness Plan, Includes $6 Billion Investment to HBCUs

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Kisha Smith

Today, President Biden announced a three-part plan to provide debt relief for those he says need it most, citing the skyrocketing cumulative federal student loan debt—$1.6 trillion and rising for more than 45 million borrowers—as a significant burden on America’s middle class.

Offering targeted debt relief as part of a comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families, Biden announced that the Department of Education would provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.

Borrowers are eligible for the relief if their individual income is less than $125,000 ($250,000 for married couples). No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action. To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.

“All this means people can finally crawl out from under that mountain of debt to get on top of their rent and their utilities. To finally think about buying a home or starting a family or starting a business,” Biden said in remarks from the White House.

The President is also directing the Department of Education to make the student loan system more manageable for current and future borrowers by (1) cutting monthly payments in half for undergraduate loans; and (2) fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness.

To further reduce the cost of college, the President has said that he will continue to fight to double the maximum Pell Grant and make community college free, noting that colleges had an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.

Added Biden, “It includes unprecedented investments — nearly $6 billion in historic Black colleges, much of which is focused on pandemic relief to help students cover tuition and other costs so they can stay in school,”

This Administration has already taken key steps to strengthen accountability, including in areas where the previous Administration weakened rules. The Department of Education is announcing new efforts to ensure student borrowers get value for their college costs.

The President freely admitted that the plan would not make everyone happy, stating “But I believe my plan is responsible and fair. It focuses the benefit on middle class and working families. It helps both current and future borrowers. And it will fix a badly broken system.”

Since 1980, the total cost of both four-year public and four-year private college has nearly tripled even after accounting for inflation. Federal support has not kept up: Pell Grants once covered nearly 80 percent of the cost of a four-year public college degree for students from working families, but now only cover a third. That has left many students from low- and middle-income families with no choice but to borrow if they want to get a degree.

All told, the plan could provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers and by targeting relief to borrowers with the highest economic need, the Administration’s actions would help narrow the racial wealth gap.

The Department of Education is also announcing new actions to hold accountable colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes.

“Today’s announcement opens the door for a long overdue conversation about building wealth,” said Ebonie Riley, Senior Vice President of Policy & Strategic Partnerships at the National Action Network. “Canceling student debt is a cornerstone of a comprehensive vision that helps everyone. Not acting would have kept another generation from reaching their full potential because of the crushing debt they took on in hopes of greater opportunity.”


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