Student loan decision unveiled: What you need to know about extended pause, debt payments

Millions of Americans were waiting for guidance on when, or if, student loan payments would restart. The wait is over.

President Joe Biden announced his student loan debt plan Wednesday. The Sum shares what you should know.

TO SUM IT UP

• Student loan payments have been paused since March 2020, part of federal pandemic relief signed into law by former President Donald Trump and extended by Biden.
  
  

• That pause was set to expire at the end of August. It was extended for a final time, until Dec. 31. The 44 million people burdened with student loans hold around $1.7 trillion in mostly federal debt.

• Meanwhile, under the plan, borrowers who went to college on Pell Grants will be eligible for $20,000. Those who didn’t receive Pell Grants will be eligible for $10,000 in relief. It won’t be counted as taxable income.

• This only applies to people earning less than $125,000 and households making less than $250,000 annually.

THE BACKGROUND

• The White House says this move will cancel the full balance for about 20 million borrowers.

• Repayment can be capped at 5% of your monthly income for undergraduate loans.

• Before Wednesday’s announcement, some already indicated concerns that the plan wouldn’t go far enough.

WHY IT MATTERS

• The millions of Americans burdened with student loans hold more than $1.7 trillion in debt. Most of that is federal.

• A 2022 study found most Gen Z and millennial borrowers delayed a major financial decision — such as buying a house — thanks to their student loan debt.

• 59% of graduates with debt said higher education improved their opportunities in the workplace. 10% said they regretted it.

SOURCES

• The White House: President Biden Announces Student Loan Relief for Borrowers Who Need It Most
• McClatchy: Biden just forgave student debt for millions. How to find out if your loan is affected
• The New York Times: Biden to Cancel $10,000 in Student Loan Debt; Low-Income Students Are Eligible for More
• The Washington Post: Biden proposals would help overhaul student loan system. Some say it isn’t enough.
• Forbes: Student Loans: Red, White and Blues
• CBS News: Millennials, Gen Z are putting off major financial decisions because of student loans, study finds

READ MORE ABOUT THIS IN THE SUM

The Sum breaks down complex economic issues and how they impact your life in just a few minutes a day. Follow thesum.news on Instagram for the full story.

This story was originally published August 24, 2022 at 3:03 PM with the headline "Student loan decision unveiled: What you need to know about extended pause, debt payments."

The Sum

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The Sum breaks down complex economic issues and how they impact your life in just a few minutes a day. Follow @thesum.news on Instagram for the full story.