President Joe Biden announced on Wednesday that he would forgive $10,000 in federal student loan debt for those earning a certain income — and $20,000 for Pell Grant recipients — as well as extending the pause on loan repayments. loans, thus relieving thousands of borrowers in Connecticut.
Biden’s move fulfills a promise he made during the 2020 presidential campaign to forgive some student debt. Although he didn’t go as far as some progressives wanted, the president is approving more loan forgiveness than originally expected.
The $20,000 cancellation for those with Pell Grants had not been reported until the morning of the announcement. Most recipients come from families earning less than $60,000 a year who need more financial assistance to attend school. In Connecticut, there were 77,065 Pell Grant recipients, according to 2021 data from the Education Data Initiative.
However, there are still eligibility restrictions based on income. It will apply to people who have earned less than $125,000 per year during the pandemic, or less than $250,000 for married couples declaring their taxes jointly.
Biden said his administration would also extend the freeze on student loan repayments and accrued interest for another four months, through Dec. 31. The moratorium has been in place since the start of the pandemic in March 2020 and was about to lift at the end of the month. Wednesday’s decision is the fifth and final overtime.
And for people with undergraduate student loans, they can cap their repayments at 5% of their monthly income, half the rate of most current plans.
More than 45 million people across the United States hold a total of approximately $1.6 trillion in student debt. But even for those who qualify for loan forgiveness, it would only be a fraction of what they still owe.
In Connecticut, 13.8% of its residents have student loan debt. There are 497,700 borrowers who have about $17.5 billion in student debt, according to the Education Data Initiative. The average borrower debt in the state is $35,162. And more than half of borrowers are under 35.
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The U.S. Department of Education said application to receive this relief will be available some time before federal student loan repayments resume in January 2023. And because of the U.S. bailout — the Pandemic Relief Program Democrats passed last year – the relief will not be counted as taxable income.
“Today we are delivering targeted relief that will help ensure that borrowers are not put in a more difficult financial situation because of the pandemic, and restore confidence in a system that should create opportunities, not a debt trap,” Education Secretary Miguel Cardona said. , who was the commissioner of the Connecticut Department of Education before his appointment to Biden’s cabinet.
The news was celebrated by Democrats and young voters who have long sought to free themselves from mountains of college debt. Proponents say it will provide financial relief to people of color — especially black borrowers — who tend to take out more student loans.
Some members of the Connecticut congressional delegation have been working on the issue of student debt for years. Rep. Joe Courtney, D-2nd District, has a bill that would allow borrowers who have public student loans to refinance them at 0% interest through the end of 2024.
“I’ve heard from constituents who can’t afford to buy homes, start families, or buy their necessities because of crippling student debt, and that’s why I called on the president to take this action.” Rep. John Larson, D-1st District, said in a statement. He is a co-sponsor of Courtney’s bill.
Biden’s move could give his party a boost ahead of November’s midterm elections as Democrats try to hold on to narrow majorities in the House and Senate. A poll shows a majority of Americans favor some student loan forgiveness, though a recent NPR/Ipsos survey found that an even larger majority want the government to focus on making college education more affordable.
But there are also concerns about worsening inflation through widespread debt cancellation. A CNBC/Momentive Poll published this week shows that 59% of Americans have this fear. Most Republicans oppose sweeping student aid, saying it will also add to inflation on top of recent legislation Democrats have passed on health care, climate change and tax policy.
“Once again, Democrats are replacing personal responsibility with another handout from government, spending taxpayers’ hard-earned money to pay other people’s loans,” GOP Senate candidate Leora Levy said in a statement. . “It will do nothing to address college affordability for CT families and will only encourage colleges and universities to raise prices thinking the government will just bail out borrowers again!”
Prior to the announcement, the Biden administration provided tens of millions of dollars in relief to former students who were defrauded by for-profit institutions. By Wednesday, the Biden administration had approved nearly $32 billion in student debt relief for about 1.6 million people.
Biden had been skeptical of his authority to unilaterally write off large amounts of student debt without Congress. A legal challenge to the move is planned.
Progressives and activists had pushed the Biden administration to forgive a much higher amount of up to $50,000 per borrower and not use a means test to determine who qualifies for loans based on income annual. Others want to go much further and cancel all student debt.
Sheetal Chhabria, a history professor at Connecticut College, was one of 1,000 college professors calling for universal loan forgiveness in a March letter organized by a debtors’ union, the Debt Collective. Signatories to the letter believe it would be “a powerful first step in the process of reinvesting in quality public education.”
“I find it really morally wrong to put a bunch of 18-year-olds in debt,” Chhabria said in an interview. But Biden’s decision “is a step in the right direction. It sends a signal that we can do it.
“As a society, we have to decide that education matters and start funding it,” she added.