Here's what President Biden's student loan forgiveness plan means to 3.6 million Texans with debt (2022)

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Politics // Texas Politics

Benjamin Wermund,Samantha Ketterer,Staff writers

Here's what President Biden's student loan forgiveness plan means to 3.6 million Texans with debt (11)

WASHINGTON — President Joe Biden on Wednesday said his administration will cancel student debt for millions of low and middle-income Americans, making good on a campaign promise that could clear the balance owed by thousands of Texans.

Under the plan — part of a broader effort to ease debt burdens the administration rolled out Wednesday — those earning less than $125,000 per year will have at least $10,000 in loans forgiven.

Those who attended college on Pell grants for low-income students — a group that makes up 60 percent of borrowers — will have $20,000 wiped from their balances.

The White House says the plan could forgive debt for 43 million federal loan borrowers and 20 million could have their debt completely canceled. The administration estimates that nearly 90 percent of the debt relief will go to those earning less than $75,000 per year.

(Video) Biden’s Decision To Forgive Some Student Loan Debt Sparks Controversy

Critics of the plan on Wednesday pointed to estimates that suggest it could cost the government over $300 billion.

More than 3.6 million borrowers live in Texas and owe an average of $32,920. About a third of Texas college students receive Pell grants and could be eligible for the larger debt cancellation. Texas college graduates earn a median first-year salary of $42,936 — well below the $125,000 income threshold.

An entire generation is now saddled with unsustainable debt in exchange for an attempt, at least, at a college degree,” Biden said. “All this means people can start to finally crawl out from that mountain of debt, to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business. And by the way, when this happens, the whole economy is better off.”

The president cast the move as part of the broader effort to help the economy recover from the pandemic, comparing it to the government’s forgiveness of hundreds of billions of dollars in loans meant to help small businesses weather the earliest waves of COVID.

“No one complained that those loans caused inflation,” Biden said. “They needed help, it was the right thing to do ... Now it’s time to address the burden of student debt the same way.”

It's a long-awaited decision that the president has weighed since taking office, and one that makes good on a campaign promise just months before the midterms, when Democrats will be making the case to voters that they are helping the working class. Recent polling by NPR/Ipsos indicated it may be a popular move, with 55 percent of Americans supporting forgiving $10,000 in student debt.

But Republicans argue it is unfair to those who have already payed off their debt, as well as the vast majority of American adults who do not have student loans. They say the plan will cost too much and will help those who need it the least.

“The Biden administration’s election-year stunt to force working class folks to pay off the debt of wealthy graduates is both indefensible and nonsensical,” U.S. Sen. John Cornyn, a Texas Republican, said in a statement. “As inflation continues to drain the pockets of Americans, this disastrous policy would incentivize universities to raise tuition and unfairly punish those who sacrificed to pay off their own student loans.”

Recent estimates by the University of Pennsylvania Wharton School found that an older version of the plan — which did not include the additional forgiveness for Pell recipients — would cost more than $300 billion, and that most of the debt is held by borrowers in the top 60 percent of income distributions.

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(Video) Biden's student loan forgiveness plan is a 'horrible idea,' says Kevin O’Leary

The announcement comes at the urging of progressives and civil rights groups, including the NAACP, who had pushed Biden to forgive far more. Advocates cast the plan as a major step to narrow the racial wealth gap as students of color are far more likely to take out college loans. White House officials said the average Black borrower will see their balance cut in half, and a quarter of them will have their debt forgiven all together.

“This action will wipe out the loan balances for more than a third of people with outstanding loan debt — that will put millions of people on stronger financial grounds as we emerge from the pandemic, and beyond that it’s a really significant racial justice action,” said Kyle Southern, vice president of The Institute for College Access and Success.

The plan is almost certain to face legal challenges. It is the first time a president has sought to unilaterally cancel swaths of student debt and whether the administration has the authority to do so has been the point of heated debate.

The administration says it can, citing a 2003 law that grants the secretary of education authority to offer loan relief during times of war or national emergencies.

U.S. Rep. Kevin Brady of The Woodlands, the top Republican on the House Ways and Means Committee, said he does not believe the plan is legal.

“The president is trying to use taxpayers as a personal campaign slush fund,” he said in an interview on Fox Business. “It’s wrong and I don’t believe he has the legal authority to do it.”

Texans were scrambling to figure out whether they might qualify.

‘A huge weight lifted off’

Kyle Amos, 26, hurried online to remind himself whether he received federal Pell grants while at Prairie View A&M University. He was overjoyed to find that he did — meaning his $23,000 in student loans could get slashed to $3,000.

(Video) Pres. Biden announces student loan forgiveness

“It’s barely there,” he said. “It’s a huge weight lifted off. There’s still some weight, but it’s a huge weight.”

Amos said he voted for Biden in 2016, partially because of his promise to cancel student debt. The IT professional said he saved some money during the pandemic-era pauses on repayment, which he might now divert to a home search.

“I would prefer if he canceled all of it, but this is great,” he said. “It makes so many people’s much easier. Just $20,000 for people who are low income, it makes everyone’s lives easier.”

For others who have massive balances and have spent years paying down their debt, the news was bittersweet.

Nathan Burchard, 29, said he hopes he’ll qualify, but it will hardly put a dent in the $165,000 in law school loans he expects he’ll be making monthly payments on until 2029.

“I may get the $10,000, but it really won’t make a difference,” he said. “When they turn the interest rates back on, that’s going to wipe out that $10,000 within just a couple years.”

Lauren Gottlieb-Miller, 37, consolidated her loans almost four years ago, turning to a private lender for lower interest rates — and taking federal forgiveness off the table.

In more than 10 years of making monthly payments to the government, the $70,000 she owed had increased to about $75,000, she said.

Her payments have decreased since she made the switch, and she’s on track to pay off $64,000 in graduate and undergraduate loans by the time she turns 50. Had she stayed with a federal lender, the pandemic-era pauses on interest and Biden’s $20,000 in loan forgiveness would have been significant, she said.

“It’s a moment in which you kind of feel abandoned,” said Gottlieb-Miller, a librarian in Houston.

Debt forgiveness is one piece of broader reforms the administration announced on Wednesday that White House officials say are aimed at making the student loan system more manageable for current and future students. The administration is also extending through the end of the year a pause on loan payments put in place during the pandemic.

Among the reforms: Capping monthly payments at just 5 percent of a borrower’s discretionary income, which is half the current payment rate under most plans. White House officials say that change would lower the average annual payment by more than $1,000 a year. Another change would suspend monthly payments for any college loan debtor making less than $15 an hour. Those who make regular payments for 10 years would be eligible to have up to $12,000 in debt canceled.

ben.wermund@chron.com

(Video) Biden to announce student loan relief plan, Ohio teachers go on strike, more | CBS News Prime Time

FAQs

Who will qualify for student loan forgiveness under Biden? ›

Under Biden's plan, individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will see up to $10,000 of their federal student loan debt forgiven.

Who qualifies for student loan forgiveness 2022? ›

As of March 2022, Federal Student Aid said 8.4 million borrowers with a federal direct loan were enrolled in an IDR plan. Borrowers who verified income through the Free Application for Federal Student Aid (FAFSA) within the past two years may also qualify for automatic forgiveness.

How do I know if I qualify for loan forgiveness? ›

To be eligible for forgiveness, you must have federal student loans and earn less than $125,000 annually (or $250,000 per household). Borrowers who meet that criteria can get up to $10,000 in debt cancellation. If you also received a Pell Grant during your education, you can qualify for up to $20,000 in forgiveness.

Who doesn t qualify for student loan forgiveness? ›

Second, high-income borrowers are generally excluded from receiving debt forgiveness. Individual borrowers who make less than $125,000 a year and married couples or heads of households who make less than $250,000 annually will see up to $10,000 of their federal student loan debt forgiven.

Which loans are eligible for student loan forgiveness? ›

Direct Loans qualify for forgiveness

That includes Direct Stafford Loans, and all Direct subsidized and unsubsidized federal student loans. Under the Direct program, Parent Plus and Grad Loans, are also eligible for the relief, said higher education expert Mark Kantrowitz.

What is the income limit for student loan forgiveness? ›

Who qualifies for 2022 student loan forgiveness? To be eligible for student loan debt cancellation, borrowers must have a 2020 or 2021 tax year income of less than $125,000 for individuals and less than $250,000 for married couples or heads of household.

Are student loans being forgiven after 10 years? ›

Under the new rule, loan balances will be forgiven after 10 years of payments, instead of the current 20 years under many income-driven repayment plans, for borrowers with original loan balances of $12,000 or less, according to a Department of Education statement.

Do I qualify for student loan forgiveness if I am still in school? ›

If the borrower is still in school and independent, federal student loan forgiveness would be based on the borrower's income. If the borrower is no longer in college, it is based on the borrower's income. More: Who qualifies for forgivenessHow to know the application deadline, get a refund if you paid during pandemic.

Is student loan forgiveness automatic? ›

Automatic Student Loan Forgiveness Under Biden's Plan

The Education Department has indicated that around eight million federal student loan borrowers may receive student loan forgiveness automatically, without needing to submit a formal application.

Do I qualify for student loan forgiveness if I refinanced? ›

On Aug. 24, 2022, President Joe Biden announced that individuals who earn $125,000 or less per year will be eligible for $10,000 in federal student loan cancellation. A big caveat: You cannot benefit from forgiveness from the federal government if you've refinanced your student loan.

Can I get reimbursed for student loan payments? ›

Those who made payments or paid off their federally held loans during the interest-free forbearance — by single payment or lump sum — may be eligible for refunds. Payments made since March 13, 2020, are eligible.

Are student loans forgiven after 20 years? ›

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

Who is eligible for the public service loan forgiveness program? ›

Employment with the following types of organizations qualifies for PSLF: Government organizations at any level (U.S. federal, state, local, or tribal) – this includes the U.S. military. Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code.

What happens if student loans are forgiven? ›

If you qualify for forgiveness, cancellation, or discharge of the full amount of your loan, you are no longer obligated to make loan payments. If you qualify for forgiveness, cancellation, or discharge of only a portion of your loan, you are responsible for repaying the remaining balance.

How do I apply for student loan forgiveness after 25 years? ›

You can get your federal student loans forgiven after 25 years — but only if you pay your loans under an income-driven repayment plan. You can request entry into one of the four IDR plans by applying online, but contact your federal loan servicer if you need help. This forgiveness program was broken for many years.

Is Navient a federal student loan? ›

Is Navient Federal or Private? While Congress originally created Sallie Mae to support the federal student loan program, it was eventually privatized. Navient is a private company that the U.S. Department of Education once hired to service its federal loans.

Are unsubsidized loans eligible for forgiveness? ›

No. The law that governs the Direct Loan Program does not allow borrowers to waive the grace period on Direct Subsidized Loans and Direct Unsubsidized Loans.

Do student loans go away after 7 years? ›

While negative information about your student loans may disappear from your credit reports after seven years, the student loans themselves will remain on your credit reports — and in your life — until you pay them off.

Are the student loan forgiveness programs legitimate? ›

There are real federal loan forgiveness programs out there, including Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness. But many companies will try to take advantage of borrowers by guaranteeing immediate results or requesting money up front for services they cannot provide.

How much student loan debt does the average American have? ›

Average Student Loan Debt in The United States. The average college debt among student loan borrowers in America is $32,731, according to the Federal Reserve. This is an increase of approximately 20% from 2015-2016. Most borrowers have between $25,000 and $50,000 outstanding in student loan debt.

What age does student loan get wiped? ›

It could be either when you're 65 years old or anywhere between a duration of 25 years or 30 years.

At what age do student loans go away? ›

Federal student loans go away:

After at least 20 years of student loan payments under an income-driven repayment plan — IDR forgiveness and 20-year student loan forgiveness. After 25 years if you borrowed loans for graduate school — 25 year federal loan forgiveness.

Do student loans fall off your credit? ›

If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.

Will my Navient loans be forgiven? ›

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 (10 years) qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

What is student debt relief? ›

Student Debt Relief is designed to help borrowers and families most in need as they prepare to resume student loan payments in January 2023. Nearly 90 percent of relief dollars will go to those earning less than $75,000 per year. And, no borrower or household in the top 5% of earners will benefit from this action.

What is a Pell Grant loan? ›

The California Pell Grant is used for attending college. The Pell Grant is one of the most popular forms of financial aid for undergraduate students. It is free money that you do not have to pay back. However, students who leave school early may have to give the money back to the school.

How do I qualify for debt relief? ›

How to qualify: National Debt Relief works with consumers who have at least $7,500 and up to $100,000 in unsecured debt from credit cards, personal loans and lines of credit, medical bills, business debts and private student loan debts.

Is $80 000 in student loans a lot? ›

While the average student loan debt for college students is $39,351, it isn't uncommon for students to leave school with $80,000 or more in education debt. Tackling this amount of student loan debt can be difficult and time consuming.

Who has Navient loans now? ›

What company took over Navient Loans? Aidvantage took over some — but not all — student loans that Navient serviced. Last year, Navient proposed to transfer 5.6 million student loan accounts owned by the Education Department to Aidvantage.

Who is eligible for student loan refund? ›

If you made voluntary payments on your student loan during the pandemic payment pause and those payments brought your balance below $10,000 (or below $20,000 for Pell Grant recipients) the Department of Education says that you will receive a refund. That refunded amount will apply to your remaining balance.

When can I expect my Navient settlement? ›

Restitution payments will be automatically distributed to eligible federal loan borrowers by the settlement administrator, Rust Consulting. Postcard notices were sent to eligible borrowers on April 22, 2022. If you received a postcard in the mail, you will receive a payment.

Why do my student loans say paid in full? ›

Here's what those statuses probably mean: Paid in full - the loans were recently consolidated or were commercially held Federal Family Education Loans that defaulted and were sold to the guaranty agency that owns the debt. Closed - the loans were sent to a new servicer. *

How do I get loans forgiven by Biden? ›

Here are the criteria you need to meet.
  1. You're a current federal student loan holder.
  2. You earn less than $125,000 a year or your household earns less than $250,000 a year.
  3. You're a Pell Grant recipient with loans held by the Department of Education (this is required for additional forgiveness)
6 Sept 2022

What is the income limit for student loan forgiveness? ›

Who qualifies for 2022 student loan forgiveness? To be eligible for student loan debt cancellation, borrowers must have a 2020 or 2021 tax year income of less than $125,000 for individuals and less than $250,000 for married couples or heads of household.

Do current students qualify for student loan forgiveness? ›

THE ANSWER. Yes, current college students qualify for student loan forgiveness, if they or their parents meet certain income requirements and the loans were taken out before July 2022.

Do I qualify for student loan cancellation? ›

Who is eligible for Biden student loan forgiveness? Any person who has federal student loan debt, and in 2020 or 2021, made less than $125,000 per year, or households that made less than $250,000 per year, are eligible for student loan debt forgiveness.

Is student loan forgiveness automatic? ›

Automatic Student Loan Forgiveness Under Biden's Plan

The Education Department has indicated that around eight million federal student loan borrowers may receive student loan forgiveness automatically, without needing to submit a formal application.

Can I get reimbursed for student loan payments? ›

Those who made payments or paid off their federally held loans during the interest-free forbearance — by single payment or lump sum — may be eligible for refunds. Payments made since March 13, 2020, are eligible.

Is Navient a federal student loan? ›

Is Navient Federal or Private? While Congress originally created Sallie Mae to support the federal student loan program, it was eventually privatized. Navient is a private company that the U.S. Department of Education once hired to service its federal loans.

Do student loans go away after 7 years? ›

While negative information about your student loans may disappear from your credit reports after seven years, the student loans themselves will remain on your credit reports — and in your life — until you pay them off.

Do student loans get forgiven after 10 years? ›

Under the federal program, eligible borrowers can have their loans discharged after 10 years if they meet eligibility requirements.

Are student loans forgiven after 20 years? ›

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

What does student loan forgiveness mean? ›

However, there are very specific eligibility requirements you must meet to qualify for loan forgiveness or receive help with repayment. Loan forgiveness means you don't have to pay back some or all of your loan.

Are Navient loans forgiven? ›

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 (10 years) qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Are Parent PLUS loans eligible for student loan forgiveness? ›

Federal Parent PLUS student loans offer parents of college students a way to help their children pay for their education. And like other federal student loans, Parent PLUS Loans provide opportunities for loan forgiveness.

How do I know if my student loans are privately held? ›

For federal student loans, the top of a student loan bill will have the name of your student loan servicer and the name of your federal student loan program. For private student loan bills, you'll see the name of your private lender on the bill instead.

Is mohela private or federal? ›

MOHELA is one of seven companies that service federal student loans by collecting and tracking payments. MOHELA, or the Missouri Higher Education Loan Authority, is a nonprofit company and services both federal and private student loans.

Videos

1. What happens next with student loan forgiveness?
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2. Biden expected to make announcement on student loan relief
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3. President Biden cancels $10,000 in federal student loan debt for most borrowers — 8/24/22
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4. Should student loan debt be forgiven? Attorneys generals urge Biden to cancel debt
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5. WATCH LIVE: White House holds news briefing following Biden announcement on student debt
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6. US secretary of education talks about forgiving student loans
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