President Joe Biden announced a plan Wednesday to forgive up to $20,000 in federal student loan debt.
Who is eligible?
The Department of Education said it will cancel student loan debt for individuals who make under $125,000 and married couples who make under $250,000.
Borrowers who received a Pell Grant in college are eligible for up to $20,000 in debt cancellation. People who didn't receive a Pell Grant are eligible for up to $10,000 in student loan forgiveness.
The Department of Education said it will provide an application in the coming weeks so people can claim the relief. It added that nearly 8 million borrowers may be eligible to receive relief automatically because of information already available to the department.
Future repayment plan changes
The Department of Education is also initiating a new rule that it says will lower future monthly payments.
"It would cut in half—from 10% to 5% of discretionary income—the amount that borrowers have to pay each month on their undergraduate loans, while borrowers with both undergraduate and graduate loans will pay a weighted average rate," the department said.
Loans would also be forgiven after a borrower has paid for ten years. The current rule allows loans to be forgiven after 20 years. The new rule would also cover unpaid monthly interest, the department said.
Pandemic repayment pause
President Biden extended the repayment pause that was initiated at the beginning of the pandemic. The pause will now expire on December 31, 2022. Biden said that will be the final extension of the pause.
Despite the apparent excitement of potentially getting student loan debt canceled, not everyone was happy.
Senate Minority Leader Mitch McConnell called Biden's plan unfair.
"President Biden's student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt," he said.
McConnell also claimed the plan would make inflation worse.
Approximately 43 million Americans have federal student loan debt, which totals $1.6 trillion.
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