President Joe Biden on Wednesday, Aug. 24 announced his administration’s plan to cancel up to $10,000 of federal student loan debt, with Pell Grant recipients eligible for an additional $10,000 in relief.
According to the White House, Biden’s plan will provide relief to up to 43 million borrowers and cancel the total remaining balance for roughly 20 million borrowers.
Biden’s plan will provide federal loan borrowers’ earning less than $125,000 per year — or $250,000 per year for married couples — up to $10,000 in a one-time student loan debt cancellation and up to $20,000 in debt cancellation for Pell Grant recipients.
According to the U.S. Department of Education, federal loan borrowers’ debt relief will be capped at the amount of outstanding debt.
High-income individuals or high-income households in the top 5% of income will not benefit from debt cancellation.
Private student loans are excluded from the one-time student debt cancellation.
Following Biden’s debt relief announcement, the UCA financial aid office posted a link on their website for inquiring students.
“We have had a few former students reach out to our office for information and clarification. We have posted a link to our website with the most recent official information we have been provided,” Cheryl Lyons, director of financial aid said.
“There is nothing the university is required to do, the loan servicers are handling everything, adding the financial aid office does not currently have any data on the number of students that will qualify,” Lyons said.
President Biden also extended the pause on federal student loan repayment one final time through Dec. 31, 2022.
Borrowers of federal loans should expect payments to resume in January 2023.
Nearly 8 million borrowers may be eligible for relief based on income data readily available to The U.S. Department of Education. The department of education will launch an application in early October to verify income data for borrowers whose information is not yet available.
The application will take 4 to 6 weeks to process.
Borrowers are advised to apply before Nov. 15, once the application is made available to receive relief before the pause on federal loan repayment expires on Dec. 31.
In addition to the one-time debt relief, the Biden Administration proposes to create an income-driven repayment plan that would reduce monthly payments.
The repayment plan will require borrowers to pay no more than 5% of their earnings, down from 10 percent, on undergraduate loans and raise the amount of income that is considered non-discretionary income and is protected from repayment.
According to the White House, the plan would guarantee that no borrower earning under 225% of the federal poverty level would need to make monthly payments.
Biden’s plan will forgive loan balances after 10 years of payments instead of 20 years for borrowers with original loan balances of $12,000 or less.
The plan will cover a borrower’s unpaid monthly interest so no borrower’s loan balance will grow if they make their monthly payments — even when that monthly payment is $0 because their income is low.
Arkansans with federal loans could end up owing money on their tax returns next April as Arkansas is one of 13 states that currently have laws that would tax forgiven student loan debt.
Arkansas senators voiced their concern over Biden’s plan following his announcement.
Sen. Tom Cotton, R-Dardanelle, released the following statement on his website: “There is no such thing as student loan forgiveness — this is a bailout, paid for by the large majority of Americans who never went to college or who responsibly paid off their debts. Even worse, President Biden’s plan ignores the true culprit: bloated, self-serving colleges. I’ll be introducing a bill to hold these colleges accountable for debt, lower tuition, support non-college career paths and save the taxpayers billions.”
Sen. John Boozman, R-Rogers, tweeted: “Pres. Biden’s move to ‘forgive’ student loans is a gift to his political base and an insult to taxpayers and everyone who fulfilled their obligations. Americans already struggling to keep up will bear the consequences of this irresponsible decision benefiting high-income earners.”
UCA students have mixed opinions following Biden’s announcement.
“I took out student loans. I’m excited that it looks like President Biden is keeping one of his most popular campaign promises,” Yaunica Warren, UCA alumna said.
Anthony Reiter, a Master of Business Administration graduate student did not agree with the decision.
“Personally, I think the policy is irresponsible on the macroeconomic level and will cause tuition to increase at schools. My honest opinion is that the administration is seeking to gain support ahead of the midterms by implementing this policy.”
“I don’t think that this program is necessary because there are already systems in place for deferments and lowering payments based upon income. I feel like this is all in tune with the excessive spending we have seen in the past couple of years,” Reiter said.
Reiter added, “However, I had a small loan taken out for my last semester of undergrad that I was planning to pay off, so I won’t refuse the forgiveness. I’m accepting it because it is a good decision for me personally, but the overall policy will damage the economy.”
Vivianne Flora, UCA alumna said, “I am all for it. I know that my brother has significant student loan debt, and even though this forgiveness program is just for federal loans, it will still make a difference. But for others, $10,000 is barely a dent.”
Flora continued, “I don’t have any student loans, and I know that is a blessing and might not qualify me to talk about it, but it’s a huge deal for my brother.”
More information on the one-time student loan debt relief program can be found at studentaid.gov/debt-relief-announcement/one-time-cancellation.