What About It?: Loan Forgiveness

President Joe Biden’s three-part “Student Loan Forgiveness Plan,” announced in August, could provide thousands of dollars in federal loan debt relief for low and middle-income students across the U.S. The White House on Sept. 20 estimated that 60, 500 Alaskan students would qualify, including  37,300 Alaska Pell Grant borrowers.  

The cost of a college education has steadily risen over the years. Where federal aid once covered a good chunk of tuition, it now covers a sliver, according to the Whitehouse.gov website. Pell Grants used to provide up to 80 percent of tuition costs but now typically cover only a third.  In 2022, cumulative federal student loan debt has reached $1.6 trillion. 

The federal Pell Grant helps students who have not earned their first bachelor’s degree and come from low-income and moderate households. The income designation stems from a combination of a student’s household and individual earnings. 

The Biden administration says the forgiveness plan is meant to help narrow the racial wealth gap.  According to the CollegeBoard website, federal aid has not been able to match rapidly rising tuition and college fees. CollegeBoard is a non-profit organization that develops school curriculum and college entrance testing programs like the SAT.

The Biden plan provides relief to students who have graduated from college and are currently working or looking for work. Depending on individual and household income, the plan offers up to $10,000 for those who did not receive a federal Pell Grant, and $20,000 for those who did. The $10,000 and $20,000 split is only related to whether or not the student received a Pell Grant.  

By extending the pandemic-related repayment pause through Dec. 31, the plan helps federal student loan borrowers transition to regular payments, which will begin in the New Year.

The second part of the plan outlines those who are eligible for debt relief. According to studentaid.gov, a student’s personal income must be less than $125,000 per year to qualify. The relief you receive can only be as high as the amount of debt that you have. 

The process is going to be automatic, with borrowers getting their relief without applying. All of this is detailed in Part 2 of the plan mapped out on the website. 

The third part of the plan changes the student loan system to make it “more easily manageable,” according to the Student Aid website. It states that the plan will cover a student’s unpaid interest, require monthly payments of no more than 5% of their monthly income, and forgive loan debt after 10 years for borrowers with less than $12,000 in debt.

Student loan forgiveness is not new – past programs have helped students with their student loans. The Public Service Loan Forgiveness program forgives student loan debt for people who have worked in public service or a non-profit for 10 years or more. 

The president’s plan has drawn its critics, including 22 Republican governors, including Alaska Governor Mike Dunleavy, who recently signed a letter asking Biden to withdraw it, claiming the plan will harm low-income families. While Dunleavy signed the letter, he did not announce it on his website, alaska.gov. 

by Lucas Stewart, Staff Writer, UAS Whalesong

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