What to Know About the Student Loan Forgiveness Program
As of Thursday August 25, President Biden and his admiration have implemented a student loan forgiveness program. As part of Joe Biden’s student loan forgiveness program, millions of Americans will be able to cancel or decrese their federal student debt for thousands of dollars. Many Americans are wondering, where the money for the program is coming from and will it inflation increase? White House officials claim the money comes from the federal deficit and will not affect inflation significantly. According to USASpending, “A deficit occurs when the government spends more money than it collects. The federal government has run deficits for the last 20 years.” By the end of this fiscal year, Biden says they will have cut the deficit by more than $1.7 trillion. According to Biden, this is the largest reduction of debt in a single year in American history.
Another question on many Americans minds is what criteria will officials use to determine who qualifies for federal student loan forgiveness? Forgiveness is only available to borrowers of federal student loans. The program is available to individuals with annual incomes below $125,000. The maximum annual income for married couples is $250,000. According to the New York Times, “Eligibility will be determined by your adjusted gross income.” The income figures from 2020 or 2021 can qualify you, but the income from 2022 will not. The report also states that, a student loan obtained after June 30 is not eligible for relief.
Approximately 1.4 million Michigan residents with federal student loans are expected to benefit from President Biden’s decision. State officials estimate that 30% of residents with federal loans owe less than $10,000, and this would forgive their entire debt. Approximately 700,000 Michiganders owe less than $20,000 in federal student debt, and their debt would be forgiven or cut in half. In addition, in the new plan, lower- and middle-income borrowers will have smaller, more manageable monthly payments. A monthly payment cap will be set based on a percentage of borrowers’ discretionary income, which is the money they have left over after paying their taxes. Information as to when the program is set to began has yet to be released.
