What To Know About Biden’s Student Debt Cancellation
The Biden-Harris Administration recently announced that it would be forgiving up to $20,000 of student debt for current and former students. Here’s what that might mean for Amherst students.
On Wednesday, Aug. 24, the Biden-Harris administration announced a plan to relieve and restructure student loan debt for a wide range of borrowers. The debt forgiveness program, specifically directed towards low and middle income households, will apply both to many alumni and current Amherst students who have taken out federal loans to cover the cost of their education.
Eligibility for student debt cancellation will be determined based on income levels, with additional forgiveness being allocated for Pell Grant recipients, which equates to as much as 21% of Amherst’s class of 2025, and similar percentages for other years. All borrowers whose individual income is less than $125,000, or whose household income is less than $250,000, will be eligible for $10,000 in debt cancellation, while Pell Grant recipients will be eligible for as much as $20,000 in federal loan forgiveness. Loans eligible for forgiveness include all federally-held undergraduate, graduate, and Parent PLUS loans disbursed prior to June 30, 2022. Private or personal student loans will not be covered under the program as currently announced.
Students interested in taking advantage of the student loan forgiveness program will be required to undergo an application process in the upcoming months. Though the Department of Education has yet to release the application, the White House stated that the application will be available no later than the end of the year. Students and parents can verify their eligibility by logging into their federal student aid account, and sign up to be notified upon the application’s release on the college’s financial aid page.
Though the college does not include student loans as a part of financial aid awards, and many Amherst students graduate with no student loan debt, a significant portion of Amherst students, including roughly a quarter of the class of 2021, continue to take out student loans in some form to help cover the cost of college.
“Amherst has long supported responsible and manageable loan borrowing as one of many resources to make higher education affordable,” said Dean of Financial Aid Gail Holt.
“While Amherst alumni leave with a far lower average in student loan indebtedness,” she added, “this loan forgiveness program, with an enhancement for students who received the federal Pell Grant, will help relieve the accumulation of that debt.”
In addition to the debt relief, the Biden administration also announced that it would be reforming current student loan repayment plans. “Equally important as the modest loan forgiveness are the meaningful changes in loan repayment systems going forward,” Holt said.
Upon the implementation of the Department of Education’s new payment structure, borrowers will be allowed to make smaller monthly payments. Under the existing system, borrowers are required to pay 10 percent of their discretionary income towards undergraduate loan repayment each month. Moving forward, the required payment amount will be reduced to just five percent of discretionary income, which will also be more loosely defined to impose a lesser financial burden on low- and middle-income families.
Other notable changes put forward by the Biden-Harris administration include shortening the length of payments necessary for loan balance forgiveness from 20 to 10 years for those with balances below $12,000, covering unpaid monthly interest for borrowers making monthly payments, as well as adjustments to the Public Service Loan Forgiveness Program (PSLF). Until Oct. 31, the Department of Education will be loosening PSLF restrictions for the forgiveness of student loans held by borrowers who worked in non-profit, military, or any level of government for at least 10 years.