For some of the 45 million Americans with student loans, the Biden administration’s package of debt relief is coming as a welcome, if long overdue, relief. For others, it feels like a Band-Aid over a deepening wound.
President Joe Biden announced Wednesday that the government would forgive $10,000 in loans for borrowers who earn less than $125,000 a year, and $20,000 for recipients of Pell Grants, who must display exceptional financial need. The president will also extend the moratorium on repaying student debt through Dec. 31, and capped repayment of undergraduate loans at 5% of the borrower’s monthly income.
The forgiveness only applies to federal loans, which make up about 92% of the $1.7 trillion total student loan debt.
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.
I’ll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
The development comes after the Trump administration in March 2020 implemented a moratorium on federal student loans that both deferred payments and set interest rates to 0%. The freeze was meant to provide temporary support for people who lost their jobs early in the pandemic. It has now been extended seven times, including today’s announcement.
The freeze gave debtors a chance to catch up on credit card bills, improve their credit scores and save for the first time. With inflation at the highest level in 40 years, the freeze also helped people who were simply trying to make ends meet. There are mixed feelings as to whether forgiving $10,000 is a meaningful solution to the student-debt crisis, with many Americans saying the government should focus on making college more affordable for the next generation.
Here’s what some borrowers had to say about the forgiveness plan. These quotes have been edited and condensed for clarity.
The College Professor With Loans of Her Own
“I’ll take it, but is it going to affect my life that much? Not in the long run. I’ve somewhat made peace that I’ll be paying my loans until the end of time. I went back to school for my doctorate in education in January 2021, and now have $85,000 in loans. I will likely borrow about $15,000 more for this academic year. Because I work in higher education, I should qualify for eventual forgiveness, but I don’t until I’m full-time at one school. Part of me wants to be idealistic and think that forgiveness will happen someday in the next couple years. It would change my life. I would be able to save my money, move out of my parents’ house, and start a real life on my own.”
Amanda Connelly, 33, West Long Branch, New Jersey
The Strategist Who Has Paid Off Most of Her Loans (and Doesn’t Qualify for Forgiveness)
“I attended undergrad from 2004 to 2006, and did not end up graduating. I still walked away with approximately $65,000 in loans, and my current remaining balance is about $3,800. At this point in my life, I can’t say I notice much of an impact from my loans in my day-to-day, but they certainly impact future goals like purchasing a home or opening a small business. The forgiveness plan won’t actually impact me because I made too much money last year, but I think it’s great. It’s wild to think that we’re expected to make these grand life decisions with long-lasting financial implications, especially when people are 17 or 18.”
Emma Cardenas, 36, Los Angeles
The Lawyer With $277,000 in Debt
“My loans don’t impact day-to-day, but they definitely impact my future goals. I took a public/government lawyer job partly because I love the work and partly because of [Public Student Loan Forgiveness], which is definitely possible in my job. I hope to be a prosecutor for a while and loan forgiveness would help a lot. $10,000 is a drop in the bucket, but I also know my $277,000 in debt is ‘cheap’ law school debt. Ivy leaguers have way more.”
Annie Weldon, 31, New Orleans
The Grad Student Organizing for Student Debt Forgiveness
“I work with [student advocacy organization] Rise, and to be on the brink of a new day, where students can focus less on funding their education, and more on their education itself, is a day that we have been waiting for. I wasn’t able to receive all the funding I needed because my parents collectively made too much money, but they didn’t make enough to fund both me and my younger brother’s college education at the same time. I left undergrad with $23,000 in loans. I am now up to $43,000 and have been saving and preparing for the possibility of having to start payments depending on the administration’s response. For borrowers who come from marginalized communities, education is our only route to financial freedom. Even with an education, there are still student loans that keep us from obtaining that freedom.”
Braxton Simpson, 23, Raleigh, North Carolina
The Writer Who’s Worried About Owning a Home
“When I graduated from Michigan State, I had $21,500 in student loans and my first job paid $36,000 per year. Things were incredibly tight on that salary and things became even more strained when my student loan payments began at around $256 per month. I currently have $18,207.98 left to pay. The $10,000 in forgiveness gives me more of a chance to start thinking about investments such as homeownership since I’d have more room in my budget. Even though I’m 30, the thought of adding another loan in the form of a mortgage when I still have my student loans and credit card debt makes me incredibly stressed.”
Molly Burford, 30, Detroit
The Equity Trader Who Consolidated His Loans
“I graduated from undergrad in 2005 and business school in 2007. I consolidated the loans at 5.5%, and deferred for two years given how bad 2008 was for finance jobs. At the peak, my balance was $125,000, and it’s currently sitting at $89,000. I remember a lot of years where my payment was about a third of my paycheck, and now it’s $600 a month. That is manageable for me, but it isn’t exactly couch-cushion money. It’s the difference between owning a house versus renting, it’s less padding for the emergency fund, it’s taking a true vacation versus a weekend trip, or extra money to send home to mom. My attitude is the same regardless of whether I qualify for forgiveness: I support any level of debt relief or cancellation, regardless of income threshold or means testing.”
Kyle Fenton, 42, Austin, Texas
The Paralegal Who Just Wants a Few Weekend Vacations
“I loved college, but it was such a waste of money. Would I do it again? Absolutely — I met a lot of my best friends there and even my husband. Was it worth it? Absolutely not. After graduation from undergrad I owed about $30,000 — combined with my grad school loans, I currently owe $57,071.15. My husband and I are lucky in that we don’t have kids (and we don’t want any, either), but just since the cost of living has gone up it’s been hard to maintain our lives. I just want to have enough money to visit my friends in all the cities they live in and hopefully one day travel abroad.”
Aeryn Emmerich-Wise, 30, Charlotte, North Carolina
The IT Operations Manager Who Worked Through College
“I graduated from undergrad in 2014 with about $32,000 in student loan debt. I received an academic scholarship going into college, and worked 30 to 40 hours a week in restaurants all four years of undergrad. I deferred paying my loans when I graduated because I could barely afford rent and utilities. It was a really rough few years. Overall I’m in a much better place financially than I was before the freeze simply due to my job situation. It’s nice to pay rent and bills on time without stressing out or leaving $20 in your bank account after everything. I’ve focused on paying off credit card debt since then. My balance now is $31,000 and I feel like I’m lucky compared to a lot of my friends and family. I think about my loans every single day.”
Adrienne Woodland, 30, New York City
The Graduate Student Who’s Already Paid Off $38,000
“I graduated undergrad in 2013 and had just under $50,000 in school loans. I used the grace period after graduating to try to save some money, but I was mainly living paycheck to paycheck. Over the last nine years I got my balance down to a little over $12,000 but I’m now attending graduate school and took out additional loans to help cover the cost of tuition. The freeze on payments that came with Covid-19 was instrumental in me being able to actually build both a solid ‘rainy day’ and general savings balance, but the complete cancellation of debt would have made a far greater impact.”
Morgan Schafer, 31, Cincinnati
