In an effort to aid the more than 40 million Americans who collectively owe $1.7 trillion in debt, President Biden revealed a plan on Wednesday to forgive thousands of dollars in student loan debt for borrowers. Further in this article, we will find out Who Qualifies for Biden’s student loan forgiveness Scheme?
As the cost of higher education has risen in recent decades, it has far outpaced inflation, causing student debt to surge. The Biden administration noted that Pell Grants once covered approximately 80% of the cost of a public four-year college, but now only give enough support to pay for one-third of the cost, indicating that loan programs haven’t kept up.
- For millions of Americans, Biden is eliminating up to $20,000 in student loan debt and extending the payment pause.
Borrowers have felt the weight of their student debt, and because of the financial pressure, some have been prevented from reaching milestones like buying a home or starting a family. However, not all borrowers will benefit from Biden’s loan forgiveness program, and certain borrowers, such as those with lower incomes, might benefit more than others.
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According to Century Foundation president Mark Zuckerman and Robert Shireman, head of higher education, “the administration’s initiatives will help assure that earning a degree isn’t a one-way ticket into poverty.”
Here are some important details about the new federal loan forgiveness program, including how to find out if you’re eligible.
How much of my Debt could be forgiven?
The Biden administration said that it will cancel up to $20,000 for people who received Pell Grants, which are available to low-income undergraduate students who have exceptional financial needs.
The administration said that borrowers who didn’t receive Pell Grants will get up to $10,000 in forgiveness.
Pell Grants don’t generally need to be repaid, but because they don’t cover the majority of college costs, many low-income students need to take out additional loans to enroll.
What is a Pell Grant?
According to a Congressional Research Service estimate, 6.3 million undergraduate students received Pell Grants, a need-based aid program, worth $27 billion in 2020.
According to the research, 95% of Pell Grant beneficiaries in the 2017–18 academic year hailed from families with annual incomes under $60,000. Since the prizes are grants, they are not often required to be repaid unless certain conditions are met, such as a student’s decision to leave college.
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Pell grants frequently rely on other sources of money to pay for college, even though they are not required to repay the grants; as a result, they typically have greater debt than other students. According to one study, students who get Pell grants often graduate with $4,500 more in debt than their peers.
If you’re unsure whether you received a federal Pell grant, look over any award letters for financial aid sent to you by the Office of Federal Student Aid.
Did I receive a Pell Grant?
It’s likely that you got one as a part of your financial aid package for college: According to the White House, more than 60% of the 43 million borrowers who will reportedly benefit from the administration’s plan for loan forgiveness are Pell Grant holders.
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You can check your account on studentaid.gov to see if you received a Pell Grant as part of your financial aid package if you’re unsure. On the main page of your account, there’s a section titled “My Aid.”
Mark Kantrowitz, a higher education specialist, advised that you might also inquire with the financial aid office of the college you attended to see if it can give you such information.
Why are beneficiaries of Pell Grants receiving more debt relief?
Due to the fact that these winners come from lower-income families; according to the education website Education Data Initiative, almost half of the awards go to students from families earning less than $20,000.
The average stipend is around $4,500, which is significantly less than the average annual tuition for a year of education at a private university, which is $37,400, or roughly $10,000 for a public college. As was already established, this means that many Pell recipients graduate with increased debt.
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Given that Black borrowers are twice as likely to receive Pell Grants as White students, the Biden administration thinks that increasing aid for those who receive it will also help close the racial wealth gap.
Can I submit an application for loan forgiveness right away?
Still not. The White House claims that the Department of Education is developing “a simple application process for debtors to receive relief.”
It might not be prepared until the end of 2022, though. Before the start of federal student loan installments on January 1, 2023, which have been postponed since the pandemic broke out in 2020, the Biden administration hopes to get the application completed.
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According to the White House, up to 8 million Americans could automatically receive loan forgiveness because the Department of Education already has access to their income information.
Does the debt forgiveness subject me to taxes?
No, the White House has stated that debt forgiveness will not be considered taxable income.
Do parents who have Parent PLUS loans Qualify?
Yes, say representatives of the White House. According to experts, this might offer relief to the millions of parents who took out loans to assist their children to pay for college.
President of The Century Foundation Mark Zuckerman and head of higher education Robert Shireman released a statement calling these 3.7 million families the “hidden casualties” of the student loan crisis since their parents have Parent PLUS loans that total more than $104 billion.
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According to Century Foundation research on the program, the average debt a parent with Parent PLUS loans has by the time their child graduates is close to $30,000. According to the report, parents often still owe 40% of the debt even 20 years later, which means that they have been paying off debt longer than they have been raising their kids.
Are current students with loans able to apply for forgiveness?
Yes, the White House claims. Dependent students’ eligibility for debt cancellation will be determined by their parent’s income.
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