NEWS EDITOR – ASHTON JEFFERS
On August 24th, 2022, the Biden Administration announced a student-loan forgiveness plan to address the present concern college students face with being able to afford higher education. Throughout the pandemic, payment for student loans has been temporarily suspended, which started on March 13, 2020, and has been extended until December 31, 2022. For borrowers, this plan of student-loan cancellation could have Pell Grant recipients receive up to $20,000 in debt cancellation and up to $10,000 for non-Pell Grant recipients. Those who are eligible for the cancellations are those with an income of less than $125,000, and those in the top 5% will not receive any of these benefits. There is also a potential revised loan repayment program based on income that would allow students to pay back their monthly loans based on their income and family size.
The plan is to make the student loan programs more manageable for current and future students by reducing the monthly payments on loans. The plan also helps to fix the system of Public Service Loan Forgiveness by introducing rules and adding additional changes that allow students who have worked in nonprofits or institutions at the federal, state, or local levels, the appropriate relief for their student loans. The intentions of this plan address how most borrowers come from lower or middle-class families, are Pell-Grant recipients, advance racial equity and how borrowers range in age. Still, the word is just beginning to reach students, current and former. “I hadn’t even heard of that,” said St. Mary’s alumni, Victoria Sanchez, who holds a Bachelor of Arts and got the opportunity to apply for loan forgiveness. “I think it’s a step in the right direction. There’s a lot more that can and should be done, especially considering the current economic trends the nation is seeing.”
While many students could benefit from this, reactions come as both eager, but also skeptical, especially about who has the authority to ensure debt cancellation. Opponents of debt cancellation argue that this plan is unfair to those who have paid off their student loans in the past and that it does not appropriately solve how college can be afforded in the future. Skeptics will likely challenge the president’s authority to cancel student loans in the courts, but the Department of Education states that the Secretary of Education, Miguel A. Cardona, is one to give the say-so on debt cancellation. Those worried about receiving relief may see their loans canceled before an official decision leaves the court.
Another challenge to debt relief could come in the form of state taxes. While relief is said to not be subject to federal income tax, some states consider debt cancellation as income tax at the state level. According to NPR, states such as North Carolina, California, Indiana, Mississippi, Wisconsin, Minnesota, and Arkansas have stated that they have policies that could consider the relief of taxable income or ensure that it will be taxed. Depending on the state income tax rate, borrowers could estimate paying a four-to-five percent of the $10,000 or $20,000 back to the state.
For those interested in seeing if they qualify for debt forgiveness, an application will be available through the U.S. Department of Education in early October. To be notified, subscribe for updates via email at: ed.gov/subscriptions. Relief is said to come four to six weeks after the application is submitted, and the recommendation is to apply before Nov. 15, when repayment will continue. The Department of Education will still accept applications sent after December 31, 2022.