Biden forgives up to $20,000 in student loans for Pell Grant recipients, $10,000 for millions more

Biden administration cancels up to $20,000 in student debt for Pell Grant recipients, up to $10,000 for individual borrowers who earn less than $125,000 a year and extends pause on student loan repayments four months, the White House announced on Wednesday.

Why is this important: The decision – which comes days before the August 31 deadline, when loan repayments were due to resume after a series of pandemic pauses – is expected to ease some of the debt burden of 43 million Americans while fulfilling a promise of key campaign.

Driving the news: About 20 million Americans could see their debt completely canceled as part of Biden’s announcement.

  • Debt cancellation for Pell recipients is in addition to student debt cancellation of up to $10,000 for other borrowers.
  • Importantly, the Biden administration is taking steps to make the student loan system more manageable for would-be borrowers.
  • It will cut monthly payments in half for prospective borrowers who take out undergraduate loans and hold schools accountable when they raise prices, according to congressional guidelines reviewed by Axios.
  • The $10,000 debt relief also applies to households earning $250,000 per year or less.

Be smart: The issue has forced the Biden administration to balance an attempt to attract younger, minority voters ahead of midterms with the risk of adding to runaway inflation, giving Republicans another talking point ahead of midterms. – mandates.

What they say : “Even with $10,000 of debt forgiveness, a significant number of people will be out of debt and this disproportionately benefits those in default,” Persis Yu, director of policy at the Student Borrower Protection Center, told Axios. .

  • “Extending the pause is really essential to really delivering cancellation and other programs that reform the student loan system,” Yu added.

Between the lines: The Department of Education does not have income data for most indebted Americans. Therefore, implementing cancellation below the income limit means that the agency will either have to ask borrowers to certify that they fall below the income limit, or borrowers will have to apply – a process that could be long.

  • “We should be concerned about people who are not in contact with the federal government and who might fall through the cracks,” said Bryce McKibben, former senior political adviser to Sen. Patty Murray (D-Wash.) in the Senate. Health, Education, Labor and Pensions Committee.

  • “People who are really at risk of struggling with student debt will also be most at risk of not being able to complete paperwork,” he said.

The big picture: President Biden had already approved nearly $32 billion in loan cancellations for Americans, through a number of targeted programs for borrowers defrauded by their colleges, borrowers with disabilities and government officials.

  • Progressive lawmakers, unions and civil rights groups have pushed the Biden administration to forgive up to $50,000 in student loan debt.

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