In the wake of President Biden’s announcement of student loan forgiveness for up to 43 million Americans, borrowers eagerly await long-hoped-for relief. Biden’s policy will forgive up to $20,000 in student loans for income-eligible Americans, regardless of age. Borrowers making under $125,000 annually will receive $10,000 in loan forgiveness. Any eligible borrower who was Pell Grant-eligible will receive an additional $10,000 in relief. “It just touches so many people in so many ways,” said Alex DeLonis, Director of Financial Aid at Wabash. “If it didn’t touch you specifically, it definitely did touch someone you know. Everyone knows someone with student loan debt.”
DeLonis provided data describing the effect of the policy on Wabash students. 39% of current Wabash students will see some amount of loans forgiven, and that figure does not count current freshmen. 57% of eligible Wabash students will have 100% of their debt canceled. For undeserved students, the forgiveness is even more pronounced. At Wabash, 93% of Pell students, 69% of underrepresented minority students, and 61% of first-generation students who are eligible for forgiveness will have 100% of their debt canceled. DeLonis outlined the steps that eligible Wabash students must take to receive loan forgiveness. In early October, an application for forgiveness will go live, and eligible students will need to complete it to receive their forgiveness.“Many students could be eligible automatically, but I wouldn’t want any students to assume that and miss out on the application because they think it’s going to happen automatically,” DeLonis said.
“The great majority of borrowers, they will have to do that application. DeLonis explained just how critical completing the application will be, highlighting the risk of eligible borrowers missing the forgiveness window.“I do have a feeling that millions of people will miss out because they won’t take that step and actually do the application,” DeLonis said. DeLonis explained that students should contact their federal loan servicers to determine if they are eligible for forgiveness, and check student aid.gov to determine if they have ever received a Pell grant. If students need assistance with this step, they should contact the Wabash financial aid office.The Wabash financial aid office has also created a new webpage discussing Biden’s loan cancellation policy, which students can reach at https://www.wabash.edu/admissions/ repay/cancellation.
DeLonis is on the National Board of Directors of the National Association of Student Financial Aid Administrators (NASFAA). NASFAA has welcomed Biden’s policy, but warns that the policy should be met with broader reform measures.“We note that student loan relief without proposals for systemic reform is incomplete,” NASFAA wrote in a statement. “Loan forgiveness today will not help new borrowers who are enrolling tomorrow. Students and parents need meaningful changes to the student loan system, and we are encouraged that the administration is proposing steps in that direction. NASFAA has also provided a set of recommendations that we hope the Biden administration and Congress will seriously consider.”
Among those recommendations are lowering student loan interest rates, eliminating negative amortization, and reforming the Public Service Loan Forgiveness program. To implement some of these broader reforms, the Department of Education has proposed a new income-driven repayment plan. According to the Department, the new rule would cut the amount that borrowers must pay from 10% to 5% of discretionary income.
The rule would also raise the non-discretionary income threshold, protecting more income from repayment. For borrowers with original balances under $12,000, the new rule would forgive the remaining balance after 10 years of payments instead of 20. According to the Department, these rule changes would allow nearly all community college borrowers to be debt-free in the next decade.
DeLonis explained the new rule would have a larger effect on new student loans than Biden’s loan forgiveness.DeLonis also discussed his own personal reaction to the new forgiveness, which was announced after he repaid his own loans. “I definitely borrowed loans myself. I’m also a Pell recipient, and I already paid off my loans – about $30,000,” said DeLonis. “So I would have been eligible for the $20,000, but I actually won’t come out with a penny after all of this. Which is an interesting kind of position to be in.” DeLonis further explained:“But for me, a Pell recipient student loan borrower who won’t receive a dime from this, I couldn’t be happier to see the Wabash community benefit from it.”