President Biden’s Student Debt Relief Plan Explained With Frequently Asked Questions

This August, President Biden, Vice President Harris, and the U.S. Department of Education (DOE) announced a three-part plan to help low and middle-income families deal with the increasingly burdensome cost of paying for college, while also making the student loan system more efficient and easier for borrowers to manage. The most dramatic part of the plan includes the cancellation of up to $20,000 in student loan debt, which would benefit an estimated 43 million borrowers, and completely cancel the debt for 20 million.

How We Got Here

Since 1980, the cost of both public and private colleges has nearly tripled, yet federal assistance hasn’t kept pace with the increased expense. Indeed, Pell Grants once covered roughly 80% of the cost of a four-year public college degree, but today they cover just one third. This has forced many students to rely on student loans, and today’s typical undergraduate student leaves college with nearly $25,000 in debt, according to the DOE.

With the cost of college booming and more students relying on loans, starting in 1978, Congress passed a series of laws making it progressively more difficult for borrowers to discharge student loan debt in bankruptcy. For several decades, borrowers could discharge student loan debt if repayment presented an “undue hardship,” and the loan had come due five years prior to the bankruptcy filing. But in 1998, Congress got rid of that option, effectively making it nearly impossible to discharge student loan debt in bankruptcy.

The Student Debt Relief Plan

In the wake of the aforementioned conditions, there are now some 45 million American borrowers who owe a total of nearly $1.6 trillion in student loan debt. This plan will offer the biggest break those debtors have seen from the government in decades. Specifically, under the plan, the Biden-Harris Administration authorizes the DOE to take the following three actions:

Part 1: Extend The Student Loan Repayment Pause Until The New Year.

In response to the hardships created by the pandemic, then-President Trump paused repayment of federal student loans starting in early 2020. Biden previously extended that pause multiple times, with the latest adjustment extending the deadline until August 31st. Biden’s new plan extends the pause a final time through December 31, 2022, with payments resuming in January 2023. This final pause in repayment will occur automatically, and borrowers are not required to do anything to take advantage it.

Part 2: Provide Targeted Debt Relief To Low And Middle-Income Borrowers.

To help borrowers at the highest risk for default ease the transition back to repayment, the Biden-Harris Administration authorized the DOE to provide up to $20,000 in debt cancellation to Pell Grant recipients, and up to $10,000 in debt cancellation to non-Pell Grant recipients. To be eligible for this relief, individual borrowers must have an income of less than $125,000 or $250,000 for married households.

Additionally, borrowers employed by nonprofits, the military, or federal, state, tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. This relief is