US President Joe Biden recently stated that many Americans may be eligible for a USD 10,000 forgiveness of federal student loan debt.
If they were eligible for Pell awards, which are available to American families with lesser incomes, that sum rises to USD 20,000.
The burden of student loan debt is especially heavy for Black and Hispanic borrowers who on average have less family wealth to rely on to pay for college. And the pandemic only made things worse.
This relief helps to narrow the racial wealth gap and advance racial equity.
— President Biden (@POTUS) August 25, 2022
Here is all that you need to know about it:
Who will qualify for student loan forgiveness?
If your loan is held by the Department of Education and you make less than USD 125,000 single or USD 250,000 for a family, you may be eligible to have up to USD 10,000 forgiven.
The maximum amount that can be forgiven if you obtain a Pell award, which is offered to undergraduates with the greatest financial need, is USD 20,000. If you are a dependent student and a current borrower, your eligibility for relief will be determined by your parents’ income rather than your own.
When will the student loan payment freeze be extended?
US President Joe Biden has decided that the student loan payment will be extended one last time, until December 31, 2022. The freezing started in 2020 as a way to help people struggling financially during the COVID-19 pandemic. Since then it has been extended several times. Previously, the payment was set to freeze on August 31.
Until repayments start, interest rates will remain at zero. People who were delinquent on their payments before the COVID-19 pandemic will automatically be reinstated in good standing under a previous extension announced in April.
However, details pertaining to how one can apply for student loan forgiveness have not yet been released.
What is a Pell grant and how does one have access to it?
The Biden plan will allow around 27 million borrowers who were eligible for Pell awards to have up to USD 20,000 in debt canceled.
Pell grants are specialized federal scholarships for low-income Americans; recipients may currently receive up to USD 6,895 each year for around six years.
According to the Department of Education, almost all Pell Grant recipients come from families earning less than USD 60,000 annually and frequently have more trouble repaying their loans than other borrowers.
Although Pell Grants themselves are often not repaid, beneficiaries frequently take out additional student loans.
According to Kat Welbeck, a human rights attorney at the Student Borrower Protection Center, “This enhanced protection for Pell borrowers is also a key aspect of racial justice in cancellation. Students of color, especially those who are Black and Latino, are more likely to come from low-income homes, have student debt, and borrow in higher amounts due to the racial wealth gap since student debt exacerbates existing injustices.”
How many people will this grant help?
The grant will help more than 43 million Americans who have availed of the federal student debt, with an average balance of USD 37,667, as per federal data. One-third of them have debts of under USD 10,000. Less than USD 20,000 is what half owing. More than USD 1.6 trillion in student loan debt is held by federal agencies.