President Joe Biden will cancel $10,000 in student loans and extend the student loan payment break for the seventh time.
Here’s what you need to know — and what that means for your student loans.
Biden today announced historic student loan relief to help millions of student borrowers, including 20 million student borrowers who will have all their federal student loans canceled. After years of speculation over whether Biden would embrace large-scale student loan forgiveness, Biden delivered on his campaign promise to help student borrowers get student loan relief. Additionally, it extended the student loan moratorium, giving student loan borrowers more time before their federal student loan payments restart. Here are the key details.
Biden announces $10,000 student loan forgiveness
Biden announced up to $10,000 in student loan forgiveness for each eligible student borrower who did not receive a Pell grant. Borrowers who received a Pell Grant for college will receive $20,000 in student loan relief. According to the White House, nearly all Pell Grant recipients came from families that earned less than $60,000 in annual income. As a presidential candidate, Biden has said he supports $10,000 in student loan forgiveness. Since then, he has repeatedly called on Congress to pass legislation to provide student loan forgiveness. However, although Democrats control Congress and Biden has promised to sign any student loan legislation passed by Congress, Democrats have been unable to pass any legislation. Progressive Democrats in Congress, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), have repeatedly called on Biden to forgive $50,000 in student loans. Biden and House Speaker Nancy Pelosi (D-CA) have chastised such efforts, with Pelosi saying only Congress — not the president — has the power to cancel student loans.
Student Loan Forgiveness: Who Qualifies
Here’s who qualifies for large-scale student loan forgiveness:
- You must be a student borrower with a federal student loan; and
- You earned up to $125,000 in annual income (or $250,000 as a co-filer) during the Covid-19 pandemic.
The student loan exemption extends to federal student loans, held by the US Department of Education. Biden’s student loan cancellation builds on the $32 billion in student loans he canceled as president. The president also unveiled a proposed income-based repayment plan that would cap a borrower’s monthly student loan payment for an undergraduate student loan at 5% of discretionary income. Currently, income-contingent repayment plans are based on 10% of discretionary income.
Biden extends student loan payment break
In addition to a broad student loan forgiveness, Biden extended the student loan payment pause by four months through December 31, 2022. This is Biden’s fourth extension (and seventh overall) of student loan payment break. Congress passed historic student loan relief in March 2020 in response to the Covid-19 pandemic. Federal student loan borrowers will continue to enjoy the following benefits:
The Biden administration has said student borrowers should expect student loan repayments to resume in January 2023. Republicans have opposed large-scale student loan cancellations and another extension of the pause payment of student loans. They also offered a blockbuster student loan cancellation plan and criticized Biden for canceling $400 billion in student loans.
Student loans: next steps
What are your next steps for your student loans? First, student loan forgiveness will be automatic. You will not receive a check for canceling your student loan, but the US Department of Education will directly reduce your student loan balance. Second, the student loan payment suspension will also be automatic. Even if federal student loan payments are suspended, you can voluntarily make student loan payments to reduce your student loan principal balance. Even with the large-scale cancellation of student loans and the pause in student loan payments, millions of student borrowers still face significant student loan debt. Now is the time to understand all of your student loan repayment options. Start with these popular strategies for saving money on your student loans: