The Biden administration and the U.S. Department of Education announced a three-part plan on Aug. 24 to help federal student loan borrowers transition back to regular payment as pandemic-related support expires. The plan includes loan forgiveness of up to $20,000, according to the Federal Student Aid website.
Since President Joe Biden took office in January 2021, individuals with federally held loans have not “had to pay a single dollar in loan payments” due to the economic challenges created by the pandemic, according to the website.
Under the first part of the plan, the student loan repayment pause will be extended through Dec. 31, 2022, to “ensure a smooth transition to repayment and prevent unnecessary defaults,” according to the website.
Felipe Olivarez, UTRGV assistant director of Financial Aid, stressed that the plan applies to student loans obtained before June 20, 2022.
“At this moment, we don’t know if they’re only going to approve it for those that are already in repayment, or if they will go ahead and grant the loan forgiveness for anybody that’s currently in school,” he said.
“Because, technically, while you’re in school, you’re not in repayment for student loans, because your student loan payments are deferred.”
The second part of the plan, once payments resume, to help students or borrowers at risk of delinquencies, the Education Department will provide up to $20,000 in debt cancellation to Pell Grant recipients and $10,000 to non-Pell Grant recipients. Their relief will be capped at the amount of their outstanding debt.
To be eligible, the individual’s income must be less than $125,000 or $250,000 for married couples or heads of households.
Olivarez said the Education Department will make an application available before the end of the student loan repayment pause in December of this year.
“Borrowers are advised to apply before November 15th in order to receive relief before the payment pause expires,” according to the Federal Student Aid website. “The Department of Education will continue to process applications as they are received, even after the pause expires on December 31, 2022.”
After the application has been submitted, students or borrowers can expect relief within four to six weeks.
Students or borrowers who made their income data available to the Education Department may be eligible to receive relief automatically.
Part three of the plan involves the Biden administration proposing “a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers,” according to the Federal Student Aid website.
The plan would require borrowers to not pay more than 5% of their discretionary income monthly on undergraduate loans; raise the amount of income that is considered non-discretionary income and therefore is protected from repayment; forgive loan balances after 10 years of payments and cover the borrower’s unpaid monthly interest, the website states.
Olivarez said the Financial Aid Office will make information available to the UTRGV community to make sure that everybody is aware, as far as what they need to do in order to apply for this loan forgiveness.
“So one thing that we did do with the public service loan forgiveness when they basically provided that temporary waiver, we basically collected all the information that was needed, and how to guide student loan borrowers to apply,” he said. “So we sent out emails, we placed a banner on the UTRGV homepage to redirect students to that information and that process, and how to actually submit that.”
Mark Kaswan, an associate professor in the department of Political Science, said it is a great program that is going to help a lot of people.
“There are a lot of arguments that say that it doesn’t go far enough,” Kaswan said. “And it’s still going to leave a lot of people with a lot of debt, but it’s also going to help a lot of people. It doesn’t solve the problem of student debt entirely, but it will help.”
To be notified when the application is open, visit Subscriptions | U.S. Department of Education. For more information on the plan, visit The Biden-Harris Administration’s
