*Analysts say the United States Government’s move will benefit millions of borrowers

Alexander Davis | 绿帽献妻

United States (US) President Joe Biden, in a highly-anticipated move, has announced plans to issue an Executive Order forgiving a portion of the country’s Federal student loan debt for millions of borrowers.

绿帽献妻 reliably learnt the presidential announcement comes a week before the moratorium on loan payments, in effect since early in the pandemic, is set to expire by end of August 2022.

In the administration鈥檚 plan for debt forgiveness, the US Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.

Borrowers are eligible for this relief if their individual income is less than $125,000 鈥� $250,000 for married couples, agency report said.

Loan moratorium extended to December 2022

Meanwhile, the moratorium on loan payments that would have expired August 31 has been extended to December 31, 2022.

As regards the latest development, the White House explained that nearly one-third of borrowers have debt, but no degree, according to an analysis by the Department of Education.

In other words, many of the affected students either dropped out or could not complete their degree because the cost of attendance was too high.

16 Percent of borrowers聽 in default, says White House

The White House disclosed about 16 percent of borrowers are in default, including nearly a third of senior citizens with student debt.

Federal student loan debt cannot be discharged through bankruptcy, so defaulting on a loan usually results in the government garnishing a borrower鈥檚 wages or lowering a borrower鈥檚 credit score, said the government.

Rep. Bobby Scott (D-Va.), Chairman of the House Education and Labour Committee, stated: 鈥淲e must also remember that, while debt cancellation is good news for those who currently hold student loans, it does not solve the underlying problems that caused the student debt crisis in the first place: the exorbitant cost of college, the declining purchasing power of the Federal Pell Grant, and our flawed student loan system.”

The forgiveness announcement is likely to be politically controversial, coming a little more than two months before the midterm elections, according to report.

It may also be challenged in court.

Biden has long favoured a student loan debt forgiveness programme.

However, some believe this should be done through the legislative process, not with an Executive Order.

Kindly Share This Story