Biden Announces Student Loan Relief for Borrowers Earning $125,000 or Less
President Joe Biden on August 24 announced a three-part plan to address student loan debt, including forgiveness of up to $20,000 for some borrowers and extension of the repayment freeze a final time, until the end of this year.
The first part of the plan would allow $20,000 in debt forgiveness if a taxpayer went to college on a Pell Grant, or $10,000 without the assistance. Debt forgiveness applies only to those earning less than $125,000 a year ($250,000 for married couples). The plan doesn’t specify how those earnings figures are calculated or to which tax year they apply.
The plan’s second part is an extension on the pause on student loan repayments one final time, until December 31, 2022. The third part is a modification to the income-based repayment plan rules. The Biden administration said those with undergraduate degrees and a Pell Grant would have their repayments capped at 5% of monthly income.
Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education. If the department doesn’t have a borrower’s income data, the borrower will be able to provide it when the administration launches a simple application in the coming weeks.
The Department of Education estimates that, among borrowers who are no longer in college, nearly 90% of relief dollars will go to those earning less than $75,000 a year.
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