The Biden Administration recently announced it will cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 a year, or families earning less than $250,000. Biden will also cancel up to an additional $10,000 in federal loan debt for people who received Pell Grants as low-income undergraduate students.
The Department of Education paused all student loan repayment, interest, and collections for the eighth time since the COVID-19 pandemic began, lasting over two and a half years. That pause ends December 31, 2022, and interest and collections will resume.
The Department of Education is also putting a cap on monthly minimum payments for undergraduate loans. The cap limits monthly minimum payments to 5% of borrower's income — half the rate borrowers must currently pay.
As of 2019, 43 million people owe some form of federal student loans, a median of $22,000.
The median student debt owed by families and individuals more than tripled in the last 30 years, according to 2019 data from the Survey of Consumer Finance.
According to the Education Department, 66% of Pell Grant recipients came from families that made $30,000 or less annually in 2019-2020.
The department estimates 87% of relief dollars will go to people making less than $75,000 per year. The remaining 13% make between $75,000 and $125,000. Approximately 20 million borrowers will have their remaining balance fully canceled.
The cancellation will benefit young and old student loan borrowers. The Education Department estimates that 21% of borrowers who are eligible for student loan relief are 25 and younger. Forty-four percent are aged 26-39 and the remaining borrowers are aged 40 and up. About 5% of seniors would be eligible for the relief.
Single people, Black people and people younger than 30 are more likely to hold student debt than their counterparts.
People younger than 35 consistently held the most student debt of all age groups from 1989 and onward. About 41.4% of people 35 and younger had student debt while 33.7% of people aged 35-44 had loans.
About 25.4% of single people with kids had student loans, compared with 31% of single people without children. The median debt owed by single people with kids in 2019 was $18,400 compared with $21,500 owed by single and childless individuals.
In 2019, 30.2% of Black people had student loans, an increase of 18 percentage points from 1989. In 2019, 20% of white, non-Hispanic people held student loans, an 11.7 percentage point increase over the same time period.
Student loan borrowers from Washington, DC ($55,508), Maryland ($43,619) and Georgia ($42,207) owed the most loans on average. Borrowers from North Dakota owed $29,885 on average — the lowest amount of all states.
Nationally, the average student loan borrower owes more than $36,000.
The Biden administration also proposed a change to the Public Service Loan Forgiveness Program, which cancels loans for full-time government or not-for-profit employees who've made 10 years of consecutive payments on their loans. The proposed rule would allow borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal or local government to receive credit toward loan forgiveness.
The Consumer Financial Protection Bureau estimates that 25% of the US workforce is employed in some form of public service, and many may be eligible for loan forgiveness under the new program.
More than 500,000 people have signaled their intention to pursue debt relief under this program, according to the Bureau. The Department of Education also found that almost two-thirds of people qualifying for forgiveness under the program earn less than $50,000 per year, and 86% earn less than $75,000 per year.
To learn more about loan forgiveness programs, see this recent article from USAFacts on the student loan cancellation plan.
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