Updated August 24, 2022 at 12:43 PM ET
On Wednesday, President Biden announced a sweeping effort to forgive up to $20,000 of federal student loan debt for Pell Grant recipients, and up to $10,000 for other qualifying borrowers. Biden also extended the federal student loan payment pause through Dec. 31.
"In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023," Biden said in a tweet on Wednesday.
U.S. Secretary of Education Miguel Cardona said in a statement, "Today, we're delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic, and restore trust in a system that should be creating opportunity, not a debt trap."
To qualify for the $10,000 forgiveness, individual borrowers must earn less than $125,000 a year, or less than $250,000 a year for couples. To qualify for the $20,000 forgiveness, borrowers must meet those income requirements and must have received a Pell Grant in college. Pell Grants are designed to help low-income students pay for higher education. About a third of undergraduate federal student loan borrowers receive Pell Grants every year.
The Department of Education estimates that, among borrowers who are no longer in school, nearly 90% of relief dollars will go to those earning less than $75,000 a year.
About 43 million borrowers will benefit, and 20 million will have their debt completely canceled, according to a senior administration official. The White House said more than 60% of federal student loans borrowers also received Pell Grants.
In order to benefit from this announcement, most borrowers will have to submit an application to verify their income.The Education Department said nearly 8 million borrowers already have income information on file, and should qualify to have their debts canceled automatically. The department will announce further details on how borrowers can claim this relief in the weeks ahead.
