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Biden announces historic student loan forgiveness of up to $20,000 and extension of student loan pause: key details

President Biden made a long-awaited announcement on Wednesday to sign into law a large-scale student loan forgiveness. Biden also indicated he would extend the current student loan pause again. Millions of student borrowers will benefit from these initiatives.

Biden will release more details later this afternoon. Here are the details so far.

Biden announces up to $20,000 in large student loan forgiveness

Biden has announced he will use executive action to implement a sweeping student loan forgiveness initiative that will erase $10,000 in federal student loan debt for borrowers earning less than $125,000 a year ( or $250,000 per year if married). No comparable student debt cancellation program has ever been adopted before.

$10,000 in student loan forgiveness for most borrowers would eliminate student debt for 16 million borrowers, according the Center for American Progress. Nearly one in three student borrowers would see their student debt completely erased thanks to this initiative.

Biden’s announcement also includes additional relief for Pell Grant recipients. Pell Grants are a form of federal financial aid, given to low-income students, that does not have to be repaid. Federal borrowers who earn less than $125,000 a year (or $250,000 a year if married) who received Pell Grants through their financial aid package could get up to $20,000 in federal student loan forgiveness.

“As part of my campaign promise, my administration is announcing a plan to give working and middle-class families a break as they prepare to resume federal student loan repayments in January 2023,” President Biden said. in a tweet Wednesday. He said further details would be released later today.

“I am proud of [Education Secretary Miguel Cardona] and [President Biden] for today’s unprecedented step to make 43 million people eligible for debt relief, including 20 million whose debts would be completely erased,” said Under Secretary for Education James Kvaal in a Tweeter.

Biden supported large-scale student loan forgiveness during his 2020 presidential campaign, saying he would endorse a plan to enact $10,000 in student loan forgiveness for each borrower. Biden also campaigned on a promise to erase tuition-based federal student loan debt for borrowers who attended a public university or HBCU.

But since taking office, Biden has been reluctant to use executive action to deliver on his promises, and he has questioned whether he has the legal authority to do so. White House officials have repeatedly pitched to Congress that Biden would sign a student loan forgiveness bill if passed.

When it became clear that no such bill was forthcoming, Biden began to express more openness to using executive action to cancel student debt. But he continued to resist calls to forgive $50,000 or more in student loan debt, as demanded by progressive activists and some congressional Democrats. Biden opted for a smaller number, coupled with income restrictions, after more than 18 months of debate.

Biden extends student loan hiatus until end of year

In addition to enacting a full-scale student loan waiver, Biden also announced he would extend the pause on ongoing student loans through Dec. 31. The pause, which suspended all payments and accrued interest on federal student loans held by the government since March 2020, was scheduled to end on August 31. This could be the last extension of the break, according to the White House.

The Biden administration has been roundly criticized by student loan advocacy groups and student loan managers for waiting until the last minute to grant an extension. No prior extension of student loan suspension has been issued with so little time remaining.

Still, an extension of the student loan suspension was widely expected as Education Department officials promised borrowers ample notice when payments were expected to resume. Borrowers and managers would now have that notice, with payments set to resume in January.

The Biden administration will also soon release details of a new income-focused repayment plan that will cut payments for federal undergraduate borrowers by 50% or more compared to existing plans.

How to Apply for Biden’s New Student Loan Relief

While the student loan suspension extension will be implemented automatically, the application process for Biden’s new student loan forgiveness initiative is less clear.

The Ministry of Education is said to have established procedures to automatically implement at least part of the loan forgiveness, if it has the means. For example, the Department may have current income information on file for borrowers who have recently applied for income-tested repayment plans. The department can also identify Pell Grant recipients through its federal student aid database. For other borrowers, an application will be required and further details are expected to be released shortly.

Further Reading on Student Loans

Who qualifies for nearly $4 billion in automatic student loan forgiveness under new Biden initiative

5 things student borrowers should do right now

Settlement providing $6 billion in student loan forgiveness removes hurdle: 5 key takeaways

If You’ve Been To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do