PROVIDENCE, RI – Today, the White House announced a targeted plan to offer up to $20,000 in student loan debt relief for Pell Grant recipients and $10,000 in student loan debt relief for individuals who earn less than $125,000, and extend the pause on federal student loan payments through the end of 2022.
U.S. Senator Jack Reed praised President Biden’s move to offer working families some financial breathing room as regular student loan repayments start in the new year, saying it will benefit not only students, but businesses, communities, and the nation.
Currently, about 44 million borrowers owe a collective $1.7 trillion in federal student loan debt, up from $250 billion in 2004. To focus this assistance on the middle class, the White House estimates that nearly 90 percent of this student debt relief will go to people earning less than $75,000.
Reed, who earlier this week joined U.S. Secretary of Education Miguel Cardona in headlining a celebration of Pell Grants at Salve Regina University’s Pell Center, says Biden’s student debt relief initiative is a positive step, but more work is needed to reduce long-term student loan burdens. Reed noted that making college more affordable has a broader societal impact that helps young adults afford to start a family, buy a home, save for their future, and fully participate in the economy.
“President Biden is keeping his word and delivering targeted student debt relief to lighten the load for borrowers with the highest economic need. This is a lifeline for students drowning in debt. It will help them make ends meet and keep economic recovery going. While it alleviates the problem, it doesn’t solve it. Bipartisan action is needed to reform the regulations and student loan servicing systems that have contributed to skyrocketing student loan debt. The President’s latest move will help borrowers who were harmed the most under the old rules. Reducing the burden of student debt helps individuals pay for college and participate in the economy. Businesses need a well-educated workforce, young adults need to be able to afford to start families of their own, and communities benefit from increased economic productivity,” said Reed. “Rising student debt has limited opportunities for recent generations. This student debt relief will make a big difference for young people and expand economic opportunity. It delivers a stronger return on investment than Trump tax giveaways which only benefited the extremely wealthy. We need to work together on long-term reforms so future generations of students aren’t also buried under a mountain of debt. Republicans should work with us to make college more affordable, including doubling Pell Grants and incentivizing states and universities to do their share to bring down costs.”
Senator Reed is a cosponsor of the Pell Grant Preservation and Expansion Act (S. 2081), legislation that would double the Pell Grant award — which has eroded in purchasing power over the years — index it to inflation, and make other changes to expand the award for working students and families.
“Millions of Americans have been asked to mortgage their future in order to pay for their education. That’s not fair. We need to address college affordability now and help future generations avoid this student debt burden by restoring the power of Pell Grants and making college more affordable. Ensuring that everyone has a shot to reach their full potential regardless of their economic means is how we grow our economy, strengthen the middle-class, and build our democracy,” said Reed.
Under both the Trump and Biden Administrations, borrowers with federal student loans haven’t been required to make a payment in more than two years: the payments on federal student loans have been frozen since March of 2020, near the outset of the pandemic.
During this pause — which was slated to end on August 31, but has now been extended through the end of 2022 — borrowers have not been required to make payments on their loans and interest rates were set to zero. The Department of Education also stopped collections on defaulted loans during this time. This reprieve provided millions of federal student loan borrowers with critical financial flexibility, and allowed many to pay down the principal on their debt.
Federal student loan interest rates are tied to the 10-year Treasury note and determined using a formula set by federal law. So different student borrowers have different rates, depending on when they took out the loan.
Senator Reed says that borrowers should be aware that federal student loan interest rates will be the same as before the pause. Federal student loan borrowers who need information on their loans, help on a repayment plan or assistance finding their loan servicer should go to studentaid.gov.
To date, the Biden administration has now approved $32 billion in student loan forgiveness. This includes nearly $10 billion under the Public Service Loan Forgiveness Program which offers loan relief for those working in public service after they’ve made a set number of payments on their qualifying loans.