President Joe Biden explains the Student Loan Forgiveness Plan (Photo/CNBC)
The Biden administration forecasts that over 40 million borrowers are eligible for its student loan relief plan all across the country.
“President Biden believes that education is supposed to help people climb the economic ladder but more than often debt becomes the anchor that weighs them down. That’s why he proposed this plan,” said James Kvaal, Under Secretary of Education.
The plan announced by Biden is that the U.S. Department of Education will 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 this relief if their individual income is less than $125,000 or $250,000 for households.
“This plan will benefit 43 million Americans and that’s in Red States, Blue States, in between states, urban areas, rural areas and suburbs,” said Kvaal.
About 90 percent of the expected relief will go to Americans earning less than $75,000 per year, according to a White House fact sheet.
“This is a one time action but we’re working really hard to fundamentally change how college is financed in our country,” Kvaal said.
The administration said its increased forgiveness for Pell Grant recipients could work toward narrowing the racial wealth gap as nearly 71 percent of Black and 65 percent of Latino undergraduate borrowers are Pell Grant recipients.
The Education Department anticipates that borrowers in all 50 states will benefit from the student loan forgiveness initiative, with much of the relief flowing to the nation’s most populous states including California (over 3.5 million borrowers projected to be eligible), Texas (over 3.3 million borrowers projected to be eligible), and Florida (over 2.4 million borrowers projected to be eligible).
In Wisconsin, an analysis from the Department of Education estimated the number of borrowers eligible for student debt relief is 685,100, while the estimated number of Pell borrowers eligible for student debt relief is 412,700.
However, roughly 5 million borrowers with older student loans, known as commercially held Federal Family Education Loans (FFEL), are actually with private companies rather than the government. Borrowers can check their loan type at Studentaid.gov, by going to the “My Aid” tab.
Borrowers should be able to apply for forgiveness in October, and some 8 million people may get their loans automatically cleared because the government already has their income data.
The Education Department encourages applying prior to Nov. 15 for relief to occur before restarting federal loan repayments in January.
“Unfortunately we are seeing people getting misleading information from those trying to profit from this situation so we want to make sure that people are cautioned that there are SCAM artists out there and the best thing to do is remember that we are never going to ask you to pay for the benefits that you’re entitled to,” said Kvaal.
“Always come to our website, studentaid.gov/debtrelief, to get the best information. Don’t go anywhere else,” Kvaal advised. “We will be sending emails to borrowers with all the latest information.”