President Joe Biden announced a student loan forgiveness plan on Wednesday, Aug. 24, 2022. This plan is considered to be historical and politically controversial.
Within this plan, Biden will be erasing $10,000 in federal student loan debt for students with incomes below $125,000 a year, or households that earn less than $250,000. Biden will also cancel an additional $10,000 for students who have received federal Pell Grants to attend college.
According to the administration, Biden’s plan will also extend the student loan payment pause until Dec. 31, 2022. This applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.
Current college students are qualified if their loans were issued before July 1, 2022, and students who identify as financially dependent are qualified if their parents’ household income is below $250,000.
According to the president’s administration, people who think they might be eligible must apply for the relief because the Department of Education only has data for a small percentage of borrowers. Court officials stated that applications for the relief will be available before the year ends.
Biden’s plan will make 43 million borrowers eligible for some sort of debt forgiveness and 20 million of those borrowers could get their debt erased entirely. About 60% of borrowers are recipients of federal Pell Grants which are reserved for undergraduates with the most significant financial need. This means that more than half of borrowers can get up to $20,000 in relief.
Interim Director of NMSU’s Financial Aid & Scholarship Department, Virginia Tucker, feels that the plan is substantial.
“I think that it’s a great opportunity for our student loan borrowers to decrease their debt,” Tucker said. “It will likely help students that are having trouble with the payments.”
Even though there are potential advantages, there are elements of the plan that critics are questioning. NMSU student, Camika Leiva, expressed her concerns about the plan.
“I’m unsure if Biden has the ability to do such a financial plan,” Leiva said. “If so, then it would be great for students in need. However, I’m curious on whether independent students will also be considered,” Leiva said.
Emmy West, another NMSU student, feels that the information around the plan seems “confusing and vague.”
“I just want education to be more accessible and attainable,” West said.
Students aren’t the only ones wondering whether President Biden has this kind of power. Within the political spectrum, there are also individuals who are questioning whether Biden has this authority.
The plan was denounced by much of The Republican Party as an insult to Americans who have already repaid their student loan debt and to the people who chose not to attend college. Another criticism of the plan is that it doesn’t apply to future students. Even though it doesn’t need congressional approval, it could take more than a year for the plan to be finalized.
Additionally, Biden is proposing a separate rule that would help reduce monthly payments on student loan debt. According to the administration, the proposal would create a new payment plan that will require borrowers to pay more than 5%, which is down from 10% in similar existing plans. The plan would also forgive any remaining balance due after 10 years, which is down from 20 years in existing plans.
With this new payment plan, it will mean that no one who earns less than 225% of the federal poverty level would need to make monthly payments.
Another criticism of the plan from opponents is the cost. With the new plan — including debt cancellation, the new repayment plan and the payment freeze — the overall cost will range from $400-600 billion.