October 25, 2022 | Brooke Helmick
In August 2022, the Biden Administration announced a three-part plan to eliminate up to $20,000 in student loan debt per person and reform the current loan system. For individuals who earn less than $125,000 per year ($250,000 for married couples), up to $10,000 of student loans will be forgiven. For individuals under the $125,000 threshold and who received a Pell Grant in their undergraduate work, up to $20,000 will be forgiven.
It is expected that this aid will be most impactful for women of color and low-income families. The application is now live and will remain open until December 31st, 2023. However, officials recommend applying as soon as possible.
The application takes mere minutes and only requires basic personal information, contact options, and your social security number.
Why This Matters:
In their fact sheet, the Biden Administration shared that this plan will provide relief for 43 million borrowers in the United States. Approximately half of those borrowers (20 million) will see their student loan debt erased in full. This step is not only important for the advancement of racial equity and closing both the gender and racial wealth gap but will ease financial pressures on lower-income families and mobilize more income to be funneled back into the economy.
For women, in particular, student loan forgiveness offers an opportunity for advancement. Data indicates that women hold upwards of 2/3rds of the student loan debt in this country. A study by the American Association of University Women found that women graduate with approximately $22,000 in loans, in contrast with $18,880 for male counterparts. This is particularly troubling considering that women earn roughly 26% less than men despite having the same degree.
Women of color experience these disparities more acutely. The 19th reported that women of color owe more in student loan debt than their white counterparts. A year after graduation, Black women and Native women had the most debt, with $41,466 and $36,184 owed, respectively. Higher education beyond an undergraduate degree left women with at least an additional $55,000 in debt. Increases in salary due to graduate school did not affect the gender wage gap, with women still earning a mere 81% of what their male counterparts earn.
- For individuals who make under $125,000 annually (or $250,000 for married couples):
- $10,000 in federal debt will be forgiven.
- OR $20,000 in federal debt forgiven for individuals who received a Pell Grant.
- Payments on undergraduate student loans will be capped at 5% of an individual’s monthly earnings.
- For individuals with less than $12,000 in debt, required payments end after 10 years, regardless of whether or not a balance is still owed.
- Payments made after March 2020 (i.e., payments made during the loan repayment pandemic pause) can be refunded.
- Interest will be suspended so long as the individual makes their monthly payments each month.
- If your loan is held by a commercial servicer (i.e., a private company), forgiveness may be more complicated. It is best to check your FAFSA profile to see who services your loans to determine the next steps.
- So far, seven states (Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin) will count federal student loan forgiveness as taxable. The federal government will not tax forgiveness aid.
- The pause on student loan debt payments will end in January 2023.
For more information, please visit census.gov/library/stories/2022/09/student-loan-forgiveness.html.