On Wednesday, President Joe Biden announced a three-part plan to reduce student debt for low- and middle-income borrowers.
The plan makes good on Biden’s campaign promise to eliminate $10,000 in federal student loans for individuals making less than $125,000 annually and provides up to $20,000 in debt relief for Pell Grant recipients.
Approximately 45 million borrowers will receive relief, and nearly 20 million will have their debt completely canceled. Nearly 90 percent of the student debt relief will apply to borrowers who earn less than $75,000 per year.
“It’s great to see the president take action to forgive the crushing debt burdens of borrowers from the most disadvantaged backgrounds,” Lindsay Owens, executive director of the Groundwork Collaborative, told The Washington Post.
In addition to the debt cancellation, the U.S. Department of Education is again extending the student loan payment moratorium through December 31, 2022. The department is also restructuring income-driven repayment plans to reduce monthly rates. For undergraduate loans, income-driven monthly payments will be capped at 5 percent of a borrower’s discretionary income, which is half of the current rate for most borrowers, according to the White House.
The plan also expands efforts to fix and improve the Public Service Loan Forgiveness program by providing loan forgiveness credit to those who have worked at nonprofit organizations, government agencies, or in the military. Biden also announced his intention to expand Pell Grants further and make community college free.