WASHINGTON (Gray DC) – The application to apply for the next round of student loan forgiveness is set to launch next month. However, the US Department of Education has not yet announced what date the launch will happen.
The department is urging borrowers to sign up for alerts here to be notified when the application is posted. The US Department of Education is calling the announcement a final extension. They are warning everyone to be prepared to start payments again in January 2023.
President Joe Biden announced the extension of student loan forgiveness in August. Under the president’s new extension, people who make less than $125,000 are eligible for $20,000 in forgiveness if they went to college with Pell grants. If they did not go to college with Pell grants, borrowers at that income level can receive $10,000 in student loan forgiveness. The program freezes payments through Dec. 31, 2022. The Department of Education will also propose a new program to allow people with undergraduate loans to cap repayment at 5% of their monthly income.
The Biden administration released a state-by-state breakdown of the relief. It said borrowers in all 50 states will benefit as well as Washington DC and Puerto Rico.
The student loan debt forgiveness program started at the height of the pandemic and would have expired on August 31st if the Biden administration had not issued the extension.
“We expect over 40 million borrowers to benefit from this and they’re distributed all across the country. So, big states, small states, red states, blue states, everywhere in between. Some of the states that we’re going to see a lot of benefits – in Michigan, we’re going to see more than 600,000 borrowers seeing their debt dropped down entirely to zero. The same goes for about 750,000 people in Ohio, 1.6 million people in Texas, and in Florida 2.4 million borrowers are going to see their debts reduced at least somewhat with over a million, 1.1 million having their debt forgiven entirely,” said Jordan Matsudaira, Deputy Under Secretary & Chief Economist at the US Department of Education.
Sign up here to be notified when the student loan forgiveness application is available
Read more details of the student loan forgiveness extension here from the White House
Read more on the relief here from the US Dept. of Education
Republicans have criticized the extension. Following the announcement, Senate Minority Leader Mitch McConnell (R-Ky.) called the aid a “slap in the face” and “unfair.”
He said, in part, in a statement, “Washington Democrats have found yet another way to make inflation even worse, reward far-left activists, and achieve nothing for millions of working American families who can barely tread water.” President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt. This policy is astonishingly unfair. The median American with student loans already has a significantly higher income than the median American overall. Experts who studied similar past proposals found that the overwhelming benefit of student loan socialism flows to higher-earning Americans. Democrats specifically wrote this policy to make sure that people earning six figures would benefit.”
Matsudaira counters the claim that the extension will affect inflation. He said, “I think it’s important to keep in mind, first of all, that student loan payments have been paused during the pause just to give borrowers more breathing room from the pandemic.” And, in January, that pause is going to end. So borrowers are going to have to start making payments overall. So, just in terms of the amount of income that people have available, we expect that to go down rather than up overall. And so it’s unlikely that this is going to be inflationary.”
When asked about the threat of possible legal challenges stemming from the extension, Matsudaira said the administration is comfortable with the authority they’re using to pursue the extension and they will address any possible legal challenges as they arise.
“It’s just a little bit more breathing room to give people the comfort to be able to use a little bit of their income to invest back in themselves. And, we expect this to really make a difference for millions and millions of hardworking Americans who are going to be able to breathe a little bit easier in terms of the process,” he said.
Matsudaira said once the application launches in October and eligibility is confirmed, borrowers could see their balances adjusted within the course of 4-6 weeks.
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