A strategic three-part initiative fulfills President Biden’s commitment to cancel $10,000 in student debt for low- to middle-income borrowers.
President Biden believes that higher education should open doors to a middle-class life, but for many, the financial strain of student loans turns that dream into a lifelong burden. During his campaign, he pledged to ease this challenge by providing student debt relief. Now, his administration is delivering on that promise, giving families much-needed financial relief as they prepare to resume loan payments following the economic setbacks of the pandemic.
Since 1980, the overall cost of attending both public and private four-year colleges has nearly tripled, even when adjusted for inflation. Federal aid has failed to keep pace: Pell Grants once covered almost 80% of tuition at public colleges for students from working-class families, but now they cover only about a third. As a result, many students from low- and middle-income backgrounds have little choice but to take on loans to earn a degree. According to a Department of Education analysis, the average undergraduate borrower now leaves school with close to $25,000 in student debt.
The growing burden of federal student loan debt—now at $1.6 trillion and climbing for more than 45 million borrowers—poses a major challenge for America’s middle class. Many middle-class borrowers face steep monthly payments and increasing balances that make it harder to achieve financial stability. These debts often delay major life milestones such as buying homes, saving money for retirement, and starting small businesses.
For the most vulnerable borrowers, the consequences of student debt are even more severe. According to a Department of Education analysis of a recent cohort of undergraduates, nearly one-third of borrowers carry debt without earning a degree. Many of these students were forced to leave school due to the high cost of attendance. Roughly 16% of borrowers are in default—including nearly a third of senior citizens with student loans—leading to wage garnishment or damage to credit scores. The weight of student debt also falls disproportionately on Black borrowers. Two decades after first enrolling, the average Black borrower from the 1995-96 cohort still owed 95% of their original loan balance.
Today, President Biden is unveiling a three-part plan designed to ease financial pressure on working families as they continue to recover from the economic challenges brought on by the COVID-19 pandemic. This initiative provides targeted debt relief as part of a broader strategy to address rising college costs and create a more manageable student loan system. The President has directed the Department of Education to take the following actions:
- Offer targeted debt relief to mitigate the financial impact of the pandemic, fulfilling a key campaign promise. The Department of Education will cancel up to $20,000 in student debt for Pell Grant recipients with federal loans and up to $10,000 for borrowers who did not receive Pell Grants. To qualify, individuals must earn less than $125,000 per year ($250,000 for married couples). This relief will exclude high-income earners in the top 5% of households. Additionally, to ensure a smooth transition back to repayment and prevent unnecessary defaults, the federal student loan payment pause will be extended one final time through December 31, 2022. Borrowers will resume payments in January 2023.
- Make student loan repayment more manageable for both current and future borrowers by:
- Cutting monthly payments for undergraduate loans in half. A proposed new income-driven repayment plan will shield more low-income borrowers from making payments and cap monthly payments for undergraduate loans at 5% of discretionary income—half the current rate under most existing plans. This change is expected to reduce the average annual student loan payment by over $1,000.
- Reforming the Public Service Loan Forgiveness (PSLF) program by ensuring that borrowers working in nonprofits, the military, or government positions at any level receive appropriate credit toward loan forgiveness. These improvements build on temporary measures that have already led to more than 175,000 public servants receiving over $10 billion in loan forgiveness.
- Safeguard future students and taxpayers by addressing rising college costs and holding institutions accountable for tuition hikes. The President has already pushed for the largest increase to Pell Grants in over a decade, as well as historic funding for colleges and universities. To make higher education more affordable, he continues to advocate for doubling the maximum Pell Grant and making community college tuition-free. At the same time, colleges must do their part by keeping costs reasonable and ensuring students receive a worthwhile education, not unmanageable debt. The Administration is also introducing new measures to strengthen oversight and accountability, reversing previous efforts that weakened consumer protections. The Department of Education is implementing further reforms to ensure student borrowers get value from their college investment.
Delivering Targeted Debt Relief, Honoring the President’s Pledge
To alleviate the financial strain caused by the pandemic on low- and middle-income borrowers and to prevent defaults as loan payments resume next year, the Department of Education will provide up to $20,000 in loan forgiveness for borrowers with federal loans who received a Pell Grant and earn less than $125,000 annually ($250,000 for married couples). Nearly all Pell Grant recipients come from families earning under $60,000 per year and often face greater difficulties repaying their student debt compared to other borrowers. Those who meet the income criteria but did not receive a Pell Grant in college will be eligible for up to $10,000 in loan relief.
Strengthening the Pell Grant Program and Expanding Debt Relief
The Pell Grant program has long been one of America’s most effective tools for making higher education accessible, but its purchasing power has declined over time. Today, Pell Grant recipients make up more than 60% of student loan borrowers. To address this, the Department of Education estimates that approximately 27 million borrowers will qualify for up to $20,000 in debt relief. This initiative will help borrowers unlock their full economic potential while reducing the financial hardship caused by the COVID-19 pandemic.
Current students with outstanding loans are eligible for this debt relief. Dependent students—those who rely on parental financial support—will have their eligibility determined based on their parents’ income rather than their own.
If all eligible borrowers claim the relief they are entitled to, these measures will:
- Provide financial relief for up to 43 million borrowers, including eliminating the entire remaining loan balance for approximately 20 million individuals.
- Direct relief to low- and middle-income borrowers. Among borrowers who are no longer in school, nearly 90% of the aid will go to those earning less than $75,000 annually. No individuals earning over $125,000 or households making more than $250,000—the top 5% of earners—will receive relief.
- Support borrowers of all age groups. According to Department of Education estimates, 21% of eligible borrowers are 25 years old or younger, while 44% fall within the 26-39 age range. More than a third of recipients are 40 or older, including 5% who are senior citizens.
- Promote racial equity. By prioritizing borrowers with the greatest financial need, this initiative will help address disparities in wealth. Black students are more likely to rely on loans and to take on higher amounts of debt. Additionally, Black borrowers are twice as likely as white borrowers to have received Pell Grants, with other borrowers of color also more likely to have received them. A study by the Urban Institute found that debt forgiveness programs targeting Pell Grant recipients will contribute to reducing racial wealth disparities.
Streamlining the Debt Relief Process and Extending the Loan Pause
The Department of Education is committed to quickly implementing a simple and efficient application process for borrowers to claim student debt relief. This application will be available no later than the end of the year when the pause on federal student loan repayments expires. Nearly 8 million borrowers may receive automatic relief since their relevant income data is already on file with the Department.
Thanks to the American Rescue Plan, this debt relief will not be considered taxable income at the federal level.
To ensure a smooth transition back to repayment, the Department of Education is extending the federal student loan payment pause one final time through December 31, 2022. Since President Biden took office, borrowers with federally held loans have not had to make any payments.
Making Student Loan Repayment More Affordable
Improving Existing Loan Repayment Plans
The Administration is reforming student loan repayment to ensure that both current and future low- and middle-income borrowers have smaller, more manageable monthly payments.
Under existing income-driven repayment plans, borrowers’ monthly payments are capped based on a percentage of their discretionary income, and any remaining debt is forgiven after 20 years of payments. However, these plans are often too complex and restrictive, preventing millions of borrowers from enrolling or leaving them with high monthly payments.
To address these issues and fulfill Congress’ intent for income-driven repayment, the Department of Education is proposing key reforms:
- Lowering monthly payments for undergraduate loans by reducing the required payment from 10% to 5% of discretionary income.
- Increasing the income threshold that is protected from repayment, ensuring that no borrower earning under 225% of the federal poverty level—equivalent to a $15 minimum wage for a single borrower—will be required to make a monthly payment.
- Providing earlier loan forgiveness by canceling remaining debt after 10 years of payments, instead of 20 years, for borrowers with an original loan balance of $12,000 or less. This change will allow most community college borrowers to be debt-free within a decade.
- Eliminating unpaid monthly interest growth so that borrowers who make their required monthly payments—even if that payment is $0 due to low income—will not see their loan balance increase over time.
Significant Savings for Borrowers
These improvements will simplify loan repayment and lead to major savings for low- and middle-income borrowers. For example:
- A construction worker earning $38,000 annually with a construction management credential would see their monthly payment drop to $31, down from $147, saving nearly $1,400 per year.
- A public school teacher with an undergraduate degree earning $44,000 annually would pay just $56 per month, instead of $197, saving approximately $1,700 per year.
- A nurse earning $77,000 annually and supporting a family of four would see their monthly payment reduced to $61, down from $295, for an annual savings of over $2,800.
These reforms will make student loan repayment more affordable, ensuring that borrowers can invest in their futures without being overwhelmed by debt.
Ensuring Borrowers’ Debt Balances Don’t Grow
For all borrowers enrolled in the new repayment plan, their loan balances will not increase as long as they make their required monthly payments. Additionally, any remaining debt will be forgiven once they have completed the necessary number of qualifying payments.
To simplify the process, the Department of Education will make it easier for borrowers to stay enrolled in this plan. Beginning in the summer of 2023, borrowers will have the option to authorize the Department to automatically access their income information each year. This will eliminate the burden of manually recertifying their income annually.
Improving Loan Forgiveness for Public Servants
Public service workers are entitled to earn credit toward loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. However, due to complicated eligibility requirements, past implementation failures, and inadequate guidance provided to borrowers, many have missed out on the credit they deserve.
The Department of Education has introduced temporary PSLF reforms that offer an easier path to full debt cancellation for eligible federal student loan borrowers who have worked for at least 10 years in a nonprofit, the military, or in federal, state, Tribal, or local government—including those who served non-consecutively. Borrowers who have not yet reached 10 years of service will now find it easier to receive credit for their progress toward loan forgiveness. These changes even extend eligibility to those previously told they had the wrong type of loan.
To ensure the PSLF program functions effectively in the future, the Department of Education has proposed additional regulatory improvements. These include expanding the types of payments that qualify for PSLF—such as partial, lump sum, and late payments—and allowing deferments and forbearances for service in organizations like the Peace Corps, AmeriCorps, the National Guard, and the military to count toward loan forgiveness. The Department is also working to improve the program for non-tenured faculty by ensuring their full-time employment status is properly calculated.
To increase awareness of these temporary PSLF benefits, the White House has launched four PSLF Days of Action, specifically targeting borrowers in key sectors: government, education, healthcare, emergency response, and nonprofit work. More information on these changes can be found at PSLF.gov, and eligible borrowers must apply before the temporary benefits expire on October 31, 2022.
Preventing Rising College Costs from Burdening Borrowers and Taxpayers
While providing debt relief to low- and middle-income borrowers, President Biden remains committed to curbing the rising costs of higher education. Under his leadership, students have received more financial support, including the largest increase to the maximum Pell Grant in over a decade. Additionally, nearly $40 billion was allocated to colleges and universities through the American Rescue Plan, much of which went toward emergency financial aid, helping students manage their education expenses.
The Department of Education has also taken strong measures to enforce accountability, ensuring that students are not burdened with excessive debt from low-value programs. The agency has revived the enforcement unit within the Office of Federal Student Aid and has taken action against accreditors who failed to hold institutions accountable. Notably, the Department withdrew recognition from an accreditor that oversaw several of the worst-performing for-profit institutions. Additionally, the agency is preparing a new rule to hold career programs accountable when they leave graduates with unmanageable debt—a policy that had been previously repealed.
Building on these efforts, the Department of Education is introducing new measures to hold colleges accountable for their role in the student debt crisis. These include publishing an annual watch list of programs with the highest debt levels, so students can make informed choices before enrolling. Colleges with the worst debt outcomes will also be required to submit institutional improvement plans, outlining concrete steps to reduce student debt burdens and improve post-graduation outcomes.