Biden Administration Announces Executive Actions on Student Debt

Earlier today, President Biden announced his Administration’s plan to forgive up to $20,000 of federal student loan debt for individual borrowers making less than $125,000 per year who previously received a Pell grant, and up to $10,000 of federal loan forgiveness for other borrowers making less than $125,000 a year. He also announced a final extension of the student loan repayment, interest and collections pause that was first put into place in March 2020 at the start of the COVID-19 pandemic.  

Specifically, the Biden Administration’s plan calls for:

• Borrowers with annual income during the pandemic of $125,000 (for individuals) or under $250,000 (for married couples or heads of households) will be eligible for up to $10,000 in relief. 
• Borrowers with annual income during the pandemic of under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) who received a Pell Grant in college will be eligible for up to $20,000 in debt cancellation. 
• The pause on student loan repayment, interest and collections will be extended through December 31, 2022, with all student loan payments resuming in January 2023.

Additionally, the Department of Education will propose new regulations that will:

• Create a new income-driven repayment plan that will reduce future monthly payments from 10% to 5% of discretionary income. 
• Raise the amount of income that is considered nondiscretionary income and protected from repayment. 
• Forgive loan balances after 10 years of payments, instead of the current 20 years under most income-driven repayment plans, for borrowers with original loan balances of $12,000 or less.
• Cover the borrower’s unpaid monthly interest, so that a borrower’s loan balance will not grow so long as they are making their required monthly payment.

The proposed regulations will be published in the coming days on the Federal Register, and the public will be invited to comment on the draft rule for 30 days. The Department of Education plans to release more details in the coming days on how borrowers can obtain the relief outlined above. You can read more about the plan from the White House and the Department of Education.