Student loan debt can be an economic setback for young adults looking to start their careers and move forward with their lives after college.
In August 2022, President Joe Biden released a student loan handout that would have benefited millions of Americans in debt from their time in higher education.
Read below to find out how the student loan program works.
How much student loan debt does the US have?
Over the last few decades, student loan debt in the United States has grown significantly due to a number of factors, including the accelerated increase of young people attending college in order to expand their employment options. Most high-paying white-collar jobs in the U.S. require employees to have a bachelor's degree or higher.
Therefore, the total amount of student loan debt in the country has ballooned to well over $1.7 trillion, although studies show that the rate of debt has begun to slow down in recent years. In addition, more than 43 million brooders account for that trillion-dollar debt in the United States. The average federal student loan debt balance is a little over $37,000, but the average balance including private loan debt is more than $40,000.
In order to obtain a bachelor's degree, the average college student will have to borrow at least $31,000 to help pay for tuition over a period of four years. Student loan debt started to grow significantly after 2006 as obtaining a college degree became the norm throughout the U.S.
How does student loan debt plan work?
The Biden-Harris public service loan program was launched last year to help relieve the burden of student loan debt, especially on young Americans struggling to start their careers and purchase their first homes. The program forgives the remaining balance on all federal student loans after 120 payments from working full-time for the federal, state, Tribal, and local government; the military; or a qualifying nonprofit.
Nearly all federal student loans under this plan qualify for forgiveness along with direct subsidized or subsidized loans. The plan would essentially wipe the debt from the holder's account without negatively affecting their credit score or their overall finances. However, legal challenges from Republicans have put a stop to the proposed plan in the courts.
Who qualifies for the student loan plan?
Under the parameters of Biden's student loan plan, a vast amount of Americans who make up the $1.7 trillion in student loan debt would have been eligible to have their debts wiped clean from their record. The plan states that in order to be eligible, individuals must have federal student loans and earn less than $125,000 a year or $250,000 per household.
Moreover, individuals who qualify for forgiveness could see up to $10,000 in federal debt canceled by signing up for the plan. For many Americans suffering from college loan debt, $10,000 accounts for a significant portion of the overall financial burden. However, if borrowers received a Pell Grant at some point in their college career, than they can qualify to have up to $20,000 forgiven by the federal government.