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What you need to know about Biden’s student loan forgiveness plan
Millions of Americans celebrated Thursday after President Joe Biden announced sweeping student loan debt cancellations, but there's much more to the White House's plan past canceling $10,000 of debt for graduates.
Student Loan Hero Senior Economist Jacob Channel expected millions of indebted Americans to spend Thursday scrambling to determine if they qualified for the student loan forgiveness program Pres. Biden announced the day before, and, if they did, how much of their outstanding federal student loans the country might erase for them.
"Millions of people could qualify to have most, a good chunk of or even all of their student loan forgiven," Channel said. "I think that if at any point you had a Pell Grant, you probably will qualify for that additional $10,000."
The Biden administration plans to wipe out up to $20,000 in outstanding student loans for every American who received a Pell Grant (given to those with substantial financial need) likely at any point during their college years, if the borrower now earns less than $125,000. Others also earning below that threshold will see up to $10,000 in loan debt expunged, and Channel expected current college students with loans they maybe haven't even started to repay yet to probably qualify for this forgiveness as well.
"This is one of those gray areas where I think we need a little more clarification from the department of education," Channel said.
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"What about future borrowers?" Fordham Law Prof. John Brooks said.
Brooks asked the question on the minds of every parent in this country with children high school-age or younger.
"The underlying issue here is that higher ed is really expensive," he said.
In many ways, Biden's plan fails to address the more macro, systemic issues at play when it comes to going to college in this country. You can still wrack up massive credit card debt and get it forgiven in bankruptcy court, but student loan debt follows you until you either pay it off or die.
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"In other ways," Channel said, "I think that they are taking steps to address some of these broader issues, some of these deep-rooted issues."
It maybe failed to find its way into headlines the same way the $10,000 cancellation did, but the Biden administration's overhaul of income driven replacement -- allowing borrowers to pay 5% instead of 10% of their discretionary income for a set amount of time, after which the government forgives the loan -- represents a change that, barring a future executive order from a different administration, should ease the debt burden for not only the previous and current but also future generations of college students as well.
"There are still benefits to this plan for people who haven't yet taken out loans but probably are going to in the near future," Channel said.
"I understand not everything I'm announcing today is going to make everybody happy," Biden said in Wednesday's announcement.
Brooks argued student loans are maybe uniquely problematic, given without much info to borrowers and used by some schools to enroll students in programs not appropriate or too expensive for them---all while forcing student-borrowers to pay interest rates higher than what it costs their government to lend them that money.
"A recognition that taxpayers should not be profiting from harming borrowers," Brooks said.