What does Biden’s student loan forgiveness plan mean for me?

A U.S. flag flies above a group of Pasadena City College students graduating in 2019 in California

If you have federal student loans, today is a big day.

President Joe Biden’s plan to bring relief to America’s debt-laden students and alums has been in the works since he took office. While his Democratic colleagues have asked him to wipe out between $50,000 per borrower or the entirety of the $1.6 trillion owed in federal loans, Biden stuck to his more modest $10,000 plan.

“In keeping with 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,” tweeted the President Wednesday, accompanied by a graphic offering the basics of his plan.

Although the announcement surprised few, many borrowers still have questions about what the plan means for them.

What do we know about the forgiveness plan?

Basically, the plan breaks down this:

$20,000 in debt relief for Pell Grant borrowers

$10,000 in debt relief if you did not receive a Pell Grant

Forgiveness only applies to those earning under $125,000 ($250,000 for married couples)

The student loan pause is extended one final time to Dec. 31, 2022

Lower monthly payment caps from 10% to 5% of a borrower’s discretionary monthly income

Treat income less than 225% of the federal poverty line as non-discretionary, exempting it from repayment plans

Cover interest costs for borrowers whose incomes are too low to owe monthly repayment under the plan

Forgive loan balances after 10 years of payments for borrowers with loan balances of $12,000 or less

Is it enough?

That comes down to a lot of factors. Race and socioeconomic status can dictate whether forgiveness will make a big difference.

For example, Black students owe on average $25,000 more than white college graduates. And four years after graduation, Black students owe an average of 12.5% more than they borrowed. Some civil-rights advocates, including NAACP President Derrick Johnson, argued today that the plan continues to leave African Americans, specifically women, behind.

Why? In short, the racial wealth gap. “I think one of the broad things that you can point to is sort of the racial wealth gap, which leads to an individual attending the same college potentially [taking] on more loans, because of the lack of savings wealth, to help fill in the gap between the remainder of the cost of attendance,” Kristin Blagg, a senior research associate at the Center on Education Data and Policy at the Urban Institute told Reckon in Dec. 2020. “And then also on the repayment side, that wealth gap perpetuates itself.”

What if I recently paid off my loans?

Biden’s detailed plan doesn’t mention any retroactive debt forgiveness.

Is the plan fair to people who paid off their loans?

This is a common argument and a popular talking point of political conservatives. However, supporters of debt relief note that college is more expensive than it’s ever been.

Consider that since 1980, the cost of tuition has tripled while wages have stagnated. Federal student loan debt has tripled in just 15 years, going from around $500 billion in 2007 to $1.6 billion today, according to the U.S. Department of Education Statistics.

I have private loans — what about me?

Sorry, Biden’s plan only covers federal loans.

But wait, didn’t Biden campaign on a promise to wipe away all student loan debts?

Biden never promised to wipe away all student debt. Elizabeth Warren had pledged to wipe out all student debt, while Senate Leader Chuck Schumer pushed for $50,000 in forgiveness.

What if I’m still a student?

You technically qualify, but not if someone claims you as a dependent on their taxes. The forgiveness will based on that person’s income.

I took out loans when I started college, but didn’t get my degree. Am I eligible?

You still qualify for relief.

What kind of dent does it put in the amount of overall national student debt?

According to the Wharton School of Business at the University of Pennsylvania, the plan will cost around $330 billion. That leaves $1.3 trillion in federal student loan debt.

I’m still recovering from high gas and grocery prices! Will erasing debt lead to more inflation?

It could. Former Treasury Secretary Larry Summers said, “Student loan debt relief is spending that raises demand and increases inflation,” Summers said on Twitter. “It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college.”

He added that student loan relief “will also tend to be inflationary by raising tuitions.”

In addition, a recent survey found that 59% of respondents thought student loan relief would hurt inflation.

Where should I go for information about my situation?

You can start by speaking to your loan servicer. Not sure what company that is? You can find that information on the Student Loan website.

Also, follow us on Instagram for a list of organizations to follow for reliable information about loans and debt relief.

Christopher Harress

Christopher Harress |

Climate change reporter on the east and Gulf coasts.

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