For millions of individuals, President Joe Biden's federal student loan forgiveness program provides some comfort. It proposes offering qualifying borrowers up to $10,000 in federal student loan debt relief. Individuals who got a Pell award during college may qualify for an additional $10,000 in aid.
Yet, no debt has yet been forgiven. As legal challenges make their way through the courts, the proposal was put on indefinite pause. The Supreme Court will hear arguments in two lawsuits involving the forgiveness scheme on Tuesday, with a ruling due by the end of June or the beginning of July.
According to the Federal Reserve Bank of New York, the student loan debt of millions of Americans amounted to more than $1.6 trillion at the end of 2017.
It is the outcome of a decades-long increase in indebtedness and escalating school expenditures.
The findings from the Federal Reserve reveal that those under the age of 30 are more likely to have student loan debt than older adults, highlighting the heavy weight on a new generation of Americans.
The impact, however, is intergenerational. Approximately one-fourth of outstanding student loan debt is owed by Americans aged 50 and older.
Those with a college degree earn more than those without one. According to estimates from the Bureau of Labor Statistics, in 2021, full-time workers with a bachelor's degree will earn around $27,000 more than those with a high school diploma and no degree.
But these high-paying occupations come with a cost. In the 2020-2021 academic year, the College Board found that 51% of students who graduated from four-year public colleges had federal debt average over $21,000 per individual. 53% of private school graduates have an average federal debt of over $22,000.
The Supreme Court will hear arguments in two lawsuits involving the forgiveness scheme on Tuesday, with a ruling due by the end of June or the beginning of July.
The Biden administration unveiled the federal student loan forgiveness program, which, if implemented, will provide up to $20,000 in debt relief.
Even if the Supreme Court rejects the one-time loan forgiveness program, it is less probable that the planned repayment plan will face the same legal obstacles.
Biden also unveiled a new income-based repayment program designed to make student loan repayment more bearable.
The idea would limit payments to 5% of the borrower's discretionary income, shorten the time required for loan forgiveness, and cover unpaid monthly interest when amounts are low.
