What’s included, what are future steps and how to make sure you get your refund
President Joe Biden announced recently that he was canceling up to $20,000 of debt for borrowers who previously received a Pell Grant, and $10,000 of debt for those who didn’t.
This announcement came on Aug. 24, just as the midterm elections are approaching. “President Biden believes that a post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity,” according to an official statement on the White House website.
According to the White House fact sheet, those making below $125,000 annually will be able to receive debt relief. In addition, married couples can apply together, and their joint income must be below $250,000 a year to qualify.
Biden plans to give borrowers breathing room, and that’s exactly what this has done for recent Northwestern graduate Jay Towns who now works in advertising. Originally, he thought it would take him close to five years to pay off his loans; now he’s thinking it’ll be closer to two. Towns doubled majored in business and theater.
“With $10,000 to $20,000 taken out of that equation, I could probably be back on track, if not pay them off even earlier than I was expecting, which would be super awesome,” Towns said. This would be a big help to Towns because he’s now paying more in rent than he was expecting to right out of college, and is living in a more desirable area closer to his job.
Biden’s current plan has three parts: debt relief to address the financial issues caused by the pandemic, targeted relief to lower income and minority borrowers, and help for current and future borrowers to make loans more manageable.
The first part of this plan includes the federal loan reimbursement to both Pell Grant recipients and other borrowers. According to the Department of Education, Pell Grants are awarded to students who “display exceptional financial need.”
The plan also extends the pause on federal student loan payments until the end of the year.
This part of this plan also includes elements to help future students and borrowers. Monthly payments tied to income will be cut in half, meaning borrowers payments will be reduced by more than $1,000 yearly.
The next part of Biden’s plan is to target the people that need it most: lower income borrowers, people of color and young people.
According to the official White House website, federal student loan debt falls most heavily on Black borrowers and out of all the borrowers, 21% are under the age of 25. It’s also shown that 87% of borrowers make less than $75,000 a year.
“By targeting relief to borrowers with the highest economic need, the Administration’s actions are likely to help narrow the racial wealth gap,” the White House wrote.
The final part of Biden’s three-step plan looks ahead to things the government could do later to help future borrowers.
Biden plans on holding colleges accountable when it comes to future tuition hikes. The total cost of both public and private universities has tripled since 1980, even after accounting for inflation. This plan would include the expansion of Pell Grants to more students, as well as free community college.
In the future, Biden also plans to forgive all student loans ten years after the borrower had begun to pay them back, regardless of how much money they have left to pay. This would not only ensure that borrowers weren’t drowning in debt decades after they finished or stopped going to school, but would also stop the huge interest rates that could be stacked against them the longer they were unable to pay their balance.
“It’ll expedite the amount of time it’ll take me to pay them off and – if you know anything about student loans – they work in a compound interest way. So basically the quicker you can pay them off, the less you actually pay over time,”said Towns.
For those that qualify for federal loan forgiveness, there are a few steps to take to ensure you get the money.
According to the New York Times, you must first make sure your loan servicer knows how to find you. This means updating all information – including your address and contact information to ensure it’s accurate and up to date. If you don’t know who your loan servicer is, you can click this link through the Department of Education.
Next, you must find out if you actually need to do anything in order to get your refund. If you’re already in an income-driven repayment plan – which is a plan that sets your monthly loan payment to be affordable based on your income and family size – and have submitted your most recent tax return, the Department of Education shouldn’t need anything else. If this is not the case, you can use this link to receive an alert for when the application will be available. The application will likely come out in early October, and will be open until Dec. 31, 2023.
Who Else Qualifies?
Even if you were a student for the 2021-2022 school year, you can still get loans forgiven. If students during that year were claimed as dependents on a parent/guardian’s tax returns, loan forgiveness will be based on the parent/guardian’s annual salary – not the student’s. Federal Parent PLUS loans also apply for forgiveness, and people who did not graduate college can get a refund for student loans as well.
DePaul Central was contacted for this story but did not respond by the time of publication. However, if you are a DePaul student who has questions regarding loans or financial aid, you can reach out to DePaul Central here.
According to NPR, this legislation came at a good time politically for Biden. He passed student loan forgiveness at the end of summer legislative successes, including new legislation on climate, health care and veteran’s benefits.
The timing was also good for Democrats, Andre Perry, a senior fellow at the Brookings Institution, told NPR. The midterm elections are approaching, and the race for which party will control the Senate and the House of Representatives is close. This legislative move by Biden excited many young voters who are directly impacted by this. Democrats are hoping this will drive more of them to vote in the upcoming elections, which would make it more likely for them to keep control of Congress.
Towns, who is 22, is excited about this legislative success from the Biden Administration.
“I wasn’t advocating for this to happen necessarily, but I think that knowing how I feel now that that is a possibility, if this were taken away, I would feel very bad about it,” he said.
However, Towns is not without his criticisms.
“I think it would probably be more appropriate to have a percentage of your loans forgiven depending on what you owe, rather than a flat rate,” he said.“At the very least, it’s heading in the right direction.”
Though more progressive Democrats see Biden’s student loan forgiveness as a good start, some moderates are concerned about the costs of this plan, as well as what it could mean for their own Senate races.
Tim Ryan, a Democrat from Ohio, worries about how this legislation will impact his close race against Republican J.D. Vance, according to NPR. He worries that loan forgiveness will seem unfair to Ohioans who never got college degrees. This election is big for Ohio Democrats. If Ryan wins, both senators from Ohio will be Democrats, which hasn’t happened in the state since 1995.
This plan has historical impacts on both politics and equity in the United States. However this plan affects you, make sure you take the proper steps if you qualify for reimbursement.
Header illustration by Madeline Smith