The focus of the new programme is on people whose loans have been put on hold. Forbearance stops monthly student loan payments, but interest is still added to the loan, making it a lot more expensive for the borrower.
In Biden’s plan for student loans, most borrowers will have their debts forgiven, but legal problems could make his plan fall apart.
President Joe Biden is in charge of a federal student loan programme that has greatly increased its ability to forgive student debt. His most ambitious plan, however, could fail because of legal problems.
His administration has changed the rules about how payments are counted to make it easier for borrowers to get their loans forgiven. It has also helped borrowers who were scammed get their money back from colleges that closed and given relief to disabled borrowers. And a new plan to pay back loans based on income could lower monthly payments for millions of people by changing how discretionary income is calculated.
But Biden’s most well-known effort so far has been to cancel a lot of student loans. In the weeks after the Department of Education made the application available in mid-October, close to 26 million borrowers, or about half of those who were eligible for the relief, filled it out.
Debt cancellation was supposed to start as early as Oct. 23, but it has been put on hold for now because of more and more legal challenges. A Texas district court judge ruled that Biden’s plan was unconstitutional on November 10. This was only a few weeks after the 8th Circuit Court of Appeals put a temporary hold on the relief programme. A small number of other lawsuits are still being looked at by federal judges, while the White House fights back.
Even if debt cancellation is upheld by the courts, it might not be enough to help students in the future.
His critics say he hasn’t fixed the main issue that made people want student loan forgiveness in the first place:
Sky-high college costs and record inflation that have caused interest rates on student loans to go up after being low for years.
Who is eligible for student loan forgiveness?
People who are single and make less than $125,000 will be able to get the $10,000 in debt relief. If you are married and file your taxes together or if you are the head of the household, and your income is less than $250,000, you qualify.
The eligibility criteria are based on your AGI. In 2019, your wages can get you in, but in 2020 or 2021, it won’t.
If you got a Pell Grant and your income met these requirements, you could get an extra $10,000 in cancellation.