Student Loans: Biden Formally Opens Applications for debt Forgiveness Scheme

In News
Student Loan

The student loan forgiveness program is only available to those earning less than $125,000 annually. Or households earning less than $250,000. Despite Republican-led opposition to the plan, President Biden has billed it as a game changer for millions of Americans.

In Summary

• US President Joe Biden has formally launched his student loan forgiveness scheme; federal loans worth billions of dollars could be canceled under the plan.

• It applies to tens of millions of graduates and can potentially wipe out up to $20,000 in debt per borrower.

• An estimated 43 million Americans owe $1.6 trillion in federal student debt. On Friday, an early testing version was released, and by Monday, approximately eight million people had already applied using that version.

• According to the Federal Reserve, the median student loan debt is just over $17,000.

Student Loan
Activists hold cancel student debt signs as they gather to rally in front of the White House in Washington, DC, on August 25, 2022 [STEFANI REYNOLDS/AFP/Getty Images]

Student Loan Forgiveness Application Open

US President Joe Biden has officially launched his student loan forgiveness scheme, which could result in the cancellation of billions of dollars in federal loans.

The plan, which applies to tens of millions of graduates, allows for up to $20,000 (£17,600) in debt forgiveness per borrower.

Those who meet the eligibility requirements may apply online.

“This is a game changer for millions of Americans,” Mr. Biden said at a press conference.

A group of six Republican-led states has sued to prevent the plan from going into effect. They claim the scheme, expected to cost $400 billion, is too expensive and unfairly burdens some taxpayers.

On Monday, as legal challenges to the scheme continued in court, Mr. Biden launched a defense of his plan.

The president holds that Republican members of Congress and Republican governors are doing everything they can to deny this relief. He has ground that he will never apologize for assisting working Americans and middle-class people as they recover from the pandemic.

He previously stated that “no high-income individual or high-income household” would benefit from the plan.

Student Loan
US President Joe Biden speaks as Miguel Cardona, US secretary of education, right, listens in the Eisenhower Executive Office Building in Washington, D.C., US, on Monday, Oct. 17, 2022 [Bonnie Cash/UPI/Bloomberg/Getty Images]

Criteria for Student Loan Relief

Who is eligible for student debt relief? The scheme applies to those earning less than $125,000 per year or households earning less than $250,000; most applicants will have $10,000 of debt forgiven.

However, $20,000 will be deducted for those who have written federal Pell Grants for students in the greatest financial need.

Mr. Biden stated that completing the online form would take less than five minutes. On Friday, an early testing version was released, and the president stated that eight million people had already applied using that version by Monday.

The form requests the borrower’s name, contact information, date of birth, and Social Security number. Users are then asked to check a box confirming that they meet the income requirements.

This information is then cross-checked against existing Department of Education records, and applicants likely to exceed the income limits are asked for additional information.

Applications will be accepted until the end of 2023.

Student Loan
Senator Rick Scott, a Republican from Florida, holds a mock check reading “Biden’s Reckless Student Loan Bailout” during a news conference following the weekly Republican caucus luncheon at the US Capitol in Washington, D.C., US, on Wednesday, Sept. 7, 2022. [Eric Lee/Bloomberg/Getty Images]

A $1.6 trillion federal student debt burden

According to the White House, approximately 30 million Americans will use the form to apply for relief. At the same time, an additional eight million borrowers who already have their information on file with the Department of Education will have their debt automatically canceled.

An estimated 43 million Americans owe $1.6 trillion in federal student debt. That means that roughly one in every six American adults, or nearly one-third of all Americans with at least post-secondary education, has some student debt.

According to the Federal Reserve, the average student loan debt is just over $17,000. Approximately 17% owe less than $10,000 in federal student loans, while 7% owe more than $100,000.

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