Student loans are something that burden millions of Americans with a college education, and new plans worry some due to inflation.
Biden recently announced his new plan to help student borrowers who face debt following college.
Originally, during his campaign he had vowed to cancel students loans entirely, but that isn’t happening yet.
Here are three things to know about Biden’s plan for student loans
In Biden’s latest announcement, he shared that those receiving Pell Grants would drop $20,000 in debt and others would drop up to $10,000 if they qualify, according to NPR.
This left many people with additional questions about the forgiveness.
First, people want to know who exactly will qualify.
Most of the people with student debt will see relief out of the 43 million who have it.
In all there is $1.62 trillion in student loan debt, and this plan will erase $20 million of it.
Those who can get $10,000 erased include people with federal loans that make under $125,000 per year.
Couples making under $250,000 could also qualify for $10,000 in forgiveness.
If a student is a dependent, they will see forgiveness given based on their parents income.
Parent PLUS loans will qualify as well.
This will not count for Parent PLUS loans taken out after June 30, 2022.
If people received Pell Grants and qualify, they may see $20,000 eliminated.
Around 60% of those with federal student loans used Pell Grants.
Pell Grants are awarded to low income students who may need additional financial assistance for their college education.
In order to receive the forgiveness, there will likely be an application process.
This is to verify the income of those seeking relief.
Around 8 million people already have their financial information on file and can have their debt cancelled.
Now, a new process is being created to run smoothly for the other 35 million people who need to apply for it.
A revised income driven payment plan is also part of Joe Biden’s new student loan plan.
These plans are for those that can’t afford larger monthly payments.
The original plan had people paying 10% of their discretionary income, but now it’ll be 5%.
Will forgiving student loans cause inflation?
While Biden’s move will help Democrats with November elections, economists worry it will fuel inflation rates.
Republicans in Congress are even asking if Biden had the legal authority to cancel student loan debt, according to Reuters.
Economists saying this will free millions of dollars to spend on other things like homes, and it could add another layer to the issue of inflation.
Nobody has needed to make payments on their student loans since they were frozen at the start of the pandemic.
Many people are feeling frustrated if they had student loans that they fully paid off.
Student loans 2022: A quick guide to types of student loans and payments
Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].