Biden Announces Student Loan Debt Relief: What It Means For NJ

NEW JERSEY — Thousands of dollars in student loan debt will be canceled for millions of borrowers in New Jersey and other states under a long-awaited federal plan announced by President Joe Biden on Wednesday.

The federal government plans to forgive $10,000 in student loan debt for borrowers in New Jersey making $125,000 or families earning $250,000 a year or less, Biden said in a statement posted to Twitter. Biden is set to formally announce the plan from the White House at 2:15 p.m. Wednesday.

An additional $10,000 of forgiveness will go toward borrowers who received Pell Grants for college, which typically go to people from lower-income backgrounds.

The amount is the largest forgiveness of federal student loans per person in history, according to a report by The Hill. But it falls short of President Biden's campaign promise to "make sure everybody ... gets $10,000 knocked off of their student debt."

"In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023," Biden said on Twitter.

Under the new plan, payments on federal undergraduate loans can be capped at 5 percent of a borrower’s monthly income.

Biden also directed officials to extend an existing pause on federal student loan payments until Dec. 31. The pause, implemented to provide significant financial relief to those affected by the coronavirus pandemic, went into effect in May 2020 and was extended several times under the Trump and Biden presidencies. It was scheduled to expire on Aug. 31.

As of 2021, nearly 166 million borrowers owe a collective $1.59 trillion to student loans, more than Americans owe on their auto loans or credit card balances, according to credit reporting agency Experian’s most recent State of Student Loan Debt report.

The average balance per borrower increased slightly in 2021 to $39,487, up nearly $700 from 2020, according to Experian.

Here’s a look at how student loan debt is affecting borrowers in New Jersey, according to the Education Data Initiative:

• 1,199,400 student borrowers live in New Jersey — 12.9 percent of the state's residents.
• The average debt per New Jersey borrower is $35,434 for a total of $42.5 billion.
• 15.2 percent of the state’s indebted student loan borrowers owe less than $5,000.
• 22.9 percent owe $20,000 to $40,000.
• 2.3 percent owe more than $200,000.

An August survey conducted by the credit monitoring company ScoreSence revealed only 14 percent of U.S. borrowers with federal student loans on pause could afford the payments with no issues when the forbearance period ends. The survey also revealed that 42 percent of borrowers aren't sure how they will add loan payments back into their budget.

The Biden administration has so far taken a piecemeal approach to student loan forgiveness. In August, the administration canceled $3.9 billion in federal student debt for more than 200,000 borrowers who attended the for-profit ITT Technical Institute. In June, the Department of Education promised to erase $5.8 billion in debt related to Corinthian Colleges.

Through targeted cancellation for specific groups of borrowers, the Biden administration had previously approved nearly $32 billion in student debt for 1.6 million borrowers, The Associated Press reported.

In recent months, Democrats have increasingly called for Biden to cancel a significant portion of student loan debt. Some Democrats, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren of Massachusetts, have called on the president to forgive $50,000 per borrower.

The debt cancelations will total about $366 billion in relief, higher education expert Mark Kantrowitz told CNBC. Last month, the federal government forgave $394.6 billion in more than 4 million COVID-relief loans to businesses through the Paycheck Protection Program.