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| Photo Credit:AP. |
U.S. President Joe Biden has announced his ambitious student loan cancellation plan as part of his campaign promise to provide $10,000 in student debt forgiveness for millions of Americans. The plan also provides up to $10,000 more for students with the greatest financial need as well as new measures to lower the burden of repayment for their remaining federal student debt, The Associated Press reports.
Under the
proposals, borrowers who earn less than $125,000 a year, or families earning
less than $250,000 would be eligible for the $10,000 loan forgiveness. Recipients of Pell Grants, which are reserved
for undergraduates with the most significant financial need, can get up to
$10,000 in additional cancellations by the federal government.
The president
is extending a pause on federal student loan payments for the “final time”
through the end of 2022, according to The Associated Press.
More than 43
million people have federal student debt with an average balance of $37,667, The
Associated Press quoted federal data. Nearly a third of borrowers owe less than
$10,000, and about half owe less than $20,000. .The plan according to The White
House would erase the federal student debt of about 20 million people.
Current
students would only get a relief if their loans were originated before July 1,
2022 just as the president proposes a cap on the amount that borrowers must pay
monthly on undergraduate loans at 5% of their earnings, down from the initial
10%, according to The Associated Press.
The
proposals by the Biden administration would raise the income floor for repayments,
meaning one earning 225% of the federal poverty level must need to make monthly
payments, according to The Associated Press.
“The
positive impacts of this move will be felt by families across the country,
particularly in minority communities, and is the single most effective action
that the President can take on his own to help working families and the
economy,” said Sen. Elizabeth Warren on Wednesday in a joint statement with
Senate Majority Leader Chuck Schumer, The Associated Press reported.
The Justice
Department Wednesday released a legal opinion concluding that the Higher
Education Relief Opportunities for Students Act gives the Education secretary
the “authority to reduce or eliminate the obligation to repay the principal
balance of federal student loan debt.”