President Biden expressed his concern about student loans, stating that they become a lifelong burden for many students and their families instead of helping them gain a better quality of life. About a third of borrowers don’t even manage to obtain their degrees while still holding onto the debt.
In this new campaign, he said he will provide breathing room for working and middle-class households. He also stated that no high-income households will benefit from this action.
This new campaign has faced some criticism. Opponents believe that this new plan will add to inflation and that it is unfair to those who have already paid off their debt, but President Biden believes that this is an economic responsibility they have to face.
The three-part plan proposed will help American working families recover from the burden associated with the COVID pandemic.
The initial temporary pause implemented in March 2020 will now last until December 2022 to prevent borrowers from defaulting on their student loan repayments.
How Much of the Debt will be Canceled?
Borrowers with an individual yearly income of $125,000 and $250,000 for married couples or heads of households who have not received a Pell Grant will have $10,000 of their debt forgiven.
Borrowers with an individual yearly income of $125,000 and $250,000 for married couples or heads of households who did receive a Pell Grant will have $20,000 of their debt forgiven.
Steps to Follow to Enter the Program
In the next few weeks, an app will be launched so that borrowers will be able to provide their income information.
How is Our Economy Going to be Affected by this New Program?
The second largest debt that American families are facing nowadays is student debt, the first being mortgage loans. People with debt cannot afford to spend too much money on goods and services, which causes an impact on our country’s economy. Student debt can also affect a person’s credit score, interfering with their future.
One of the highlights of President Biden’s plan is that undergraduate loan repayment will cap at 5% of a person’s income. It will help people who hold a large debt.