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On 23 August, US President Joe Biden unveiled a three-part plan to address the increasing student debt in the country, which currently sits at USD 1.6 trillion. This has been one of his main campaign promises and has received additional pressure lately from fellow Democrats, unions and the electorate, despite vehement criticism from the GOP for its “elitist” nature and negative macroeconomic impact. It concerns “targeted debt relief” provided by the Department of Education under specific conditions:
The primary intention of this new comprehensive plan, that will reach approximately 43 million borrowers, is to support low- and middle-income borrowers. Indeed, nearly 90% of relief dollars will be channelled to those earning less than USD 75.000 a year. Furthermore, an intergenerational element is introduced, given that 21% of eligible borrowers are 25 years and under, 44% are between 26-39 and more than a third are age 40 and up. Finally, another goal concerns reducing racial inequity, as black and people of colour are traditionally more likely to receive Pell Grants. Ultimately, more than USD 1.000 will be lifted on average for annual student loan payments for both current and future borrowers.
Importantly, the ongoing halt on federal student loan repayment will be extended again until the end of 2022 with expectations to resume payments as early as January 2023. Moreover, the USD 1.9 trillion stimulus package Biden signed into law last year that eliminated the tax burden for student loan is in effect for any portion of debt discharged until January 2026.
To better manage and respond to inquiries, the Department of Education launched a dedicated website for inquiries.
Read the official press release here.