Washington – President Biden announced WednesdayAn additional $10,000 for millions of Americans and low-income borrowers would provide long-awaited relief just weeks before the midterm elections.
Under the scheme, it is the President Posted on Twitter, borrowers earning less than $125,000 a year or couples earning less than $250,000 a year are eligible for loan forgiveness of up to $10,000. Recipients of Pell Grants awarded to students with high financial need are eligible for an additional $10,000 in relief. Loan repayments are also limited to 5% of monthly income. Current students will also be eligible for loan relief, though prospective students will not, senior administration officials said.
The president has postponed student loan repayments until the end of the year, and the Department of Education said this will be the last time the moratorium is extended. Mr. Biden is scheduled to deliver remarks Wednesday afternoon, the White House said.
“True to my campaign promise, my administration is announcing a plan to give working and middle-class families breathing room as they prepare to resume federal student loan payments in January 2023,” the president tweeted.
Department of Education said About 8 million borrowers will have their loans automatically forgiven, while others will have to apply for relief. The department said an application for debt relief applicants would be released “in the coming weeks”. Sign up to be notified When the application is available.
Income limits are based on 2020 or 2021 income. In 2020 or 2021, if a person’s income is below the threshold, they will be eligible, a senior administration official said on a call with reporters.
Lakhs of borrowers are expected to be eligible for relief under the scheme. According to Department of Education data, while more than 43 million borrowers have federal student loan debt, the majority owe less than $25,000 and a quarter owe less than $10,000, according to the Federal Reserve.
The move to forgive student loans follows months of internal White House debate over its feasibility and cost. Mr. Biden made student loan forgiveness one of his top priorities during his presidential campaign, and Democrats have pushed the administration to follow through on his promise. Mr. to cancel the loan. Republicans have said Biden lacks authority and his plan faces a barrage of legal challenges.
Ahead of court battles, the education sector Posted a note Mr. General counsel Lisa Brown with legal justification for Biden’s actions. Brown cited a 2003 law known as the HEROES Act, which he said gives the education secretary broad authority over student aid programs during national emergencies.
“Under the current circumstances, this authority may be used to implement a formal debt cancellation program aimed at addressing the financial harm caused by the Covid-19 pandemic,” Brown wrote. “The Secretary may waive or modify statutory and regulatory provisions to grant a certain amount of cancellation to borrowers who have been financially affected by the COVID19 pandemic.”
A Penn Wharton budget model analysis concluded that $10,000 in student loan debt forgiveness should be available to those earning up to $125,000 per year.In the first year. It also found that two-thirds of loan forgiveness helps Americans with 60% of low-income earners.
Low-income Americans who never attended college and are struggling financially amid high inflation will not benefit from any loan cancellation, critics of student loan cancellations point out. Erasing some student loan debt won’t address the rising cost of college, which has historically outpaced inflation in recent decades.
A moratorium on student loan repayments began under the Trump administration at the start of the pandemic, and Mr. Biden has suspended student loan repayments a total of four times since taking office. With interest rates set at zero, the moratorium saves federal student loan borrowers more than $1.5 billion each month. An April report From the Financial Health Network.
Steven Portnoy and Christine Brown contributed to this report.
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