On August 24th, President Biden announced plans to cancel up to $10,000 worth of federal student loan debt for individuals earning less than $125,000 a year and up to $20,000 for recipients of Pell Grants. This policy includes Parent PLUS loans, and, in addition to canceling debt, Biden pushed the deadline for federal student loan payments to resume to December 31.
The move comes along with Biden’s Build Back Better initiative, which aims to provide support for middle-class Americans after the tumultuous years of the COVID-19 pandemic and rising prices due to inflation. The Biden administration hopes the new policy will provide “breathing room” for students and families with student debt. Student debt takes a large toll on millions of American families and it continues to grow. Approximately 43 million Americans have student debt. The average student takes out $37,667 in federal student loans to pay for tuition, according to the Education Data Initiative. The cost of college has been rising at high rates, with tuition nearly tripling since 1980, according to the College Board. The White House released a statement coinciding with the new policy, saying, “President Biden believes that a post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity. During the campaign, he promised to provide student debt relief. Today, the Biden Administration is following through on that promise and providing families breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.”
Additionally, the administration pledged to focus on bringing down the cost of higher education in general, adding, “Building off of these efforts, the Department of Education is announcing new actions to hold accountable colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes. They also include requesting institutional improvement plans from the worst actors that outline how the colleges with the most concerning debt outcomes intend to bring down debt levels.”
For Hope College students, Director of Financial Aid Jill Nutt clarified how the new policy impacts current students. “Current students with debt are eligible for loan cancellation. The policy considers the date of the loan and applies only to federally-held loans. As long as the loan had a disbursement that occurred before July 1, 2022, the loan is eligible for cancellation. Therefore, our incoming freshmen would not be eligible (unless they are transfer students with prior debt) because their loans could not be disbursed until after July 1. This also applies to parent loans, Federal Direct PLUS Loans disbursed prior to July 1, 2022. It does not include private student loans because the federal government has no authority over those loans.”
Many Democrats and progressive leaders have spoken out in favor of the new policy. Many see this as an opportunity to bring more equity for college graduates, especially considering the impact student debt has on low-income families and for the racial wealth gap in America. Senator Elizabeth Warren of Massachusetts said, “Because Black Americans borrow more money to go to school, borrow more money in school and have a harder time paying their debt off after school, the President’s action will also help narrow the racial wealth gap in the United States among borrowers,” according to NPR.
However, criticism of the plan is extensive, with members of both political parties weighing in with concerns. Many conservatives see the plan as a handout and offensive to those who have paid their debts or who chose not to go to college. Additionally, there is frustration that taxpayers have to foot the bill for these cancellations, although the Biden administration has insisted that is not the case. Meanwhile, some progressives worry that the plan doesn’t go far enough in addressing the student debt crisis. Criticisms of the plan, and possible legal challenges, could impact whether or not student debt is canceled in the future. “This current policy is just that—policy—done by executive action,” Nutt said. “There was no legislative action behind it. There is a question whether the President has the authority to do this and legal action is already underway to stop enactment of this policy. The outcome of these legal challenges will likely predict if more debt could be canceled in the future.” Although this policy can help current students and alumni, it is not a guarantee for the future.
Additionally, Nutt emphasized that the Financial Aid Office is available to help students navigate the sometimes difficult and overwhelming financial aid process. Nutt said “It is important to understand that student loans are very much a part of the education financing landscape. They are necessary to assist families with paying for college and they are not all bad. That said, you should never borrow more than you need. If you are unsure how much to borrow, the Office of Financial Aid staff are happy to assist you in estimating an appropriate amount. If you choose to borrow less than the maximum amount allowed, you can always request additional funds if you determine you need to borrow more. I would also encourage students to research the various payment plans available under the Federal Direct Student Loan Programs. Several are income-contingent, the payment amounts are determined by assessing your annual income. Finally, our low student loan cohort default rate shows that while Hope College students are incurring debt, their Hope education is putting them in a position to manage their loan payments successfully.”
The Financial Aid Office can be contacted by email at email@example.com or by phone at 616-395-7765 (toll-free calls can be directed to 1-888-439-8907).