This Is The New Student Debt Reduction Plan In The USA

José López Zamorano originally published the article on La Red Hispana.

Photo: Canva Stock.

Are you one of the millions of people who still have student debt? Did you take out a federal loan and still owe more than the original amount?

President Joe Biden unveiled a federal plan this week that, if finalized, will bring relief to millions of people struggling with student debt.

Currently, more than 25 million college graduates owe more than they originally borrowed, including many who have been making payments for years, due to the interest rates on federal student loans.

Under the new plan, up to $20,000 of a borrower's balance that has increased due to unpaid interest after starting repayment would be canceled, regardless of their income, according to the White House.

Low- and middle-income graduates enrolled in the SAVE plan or any other income-driven repayment (IDR) plan would be eligible to have the total amount that their balance has increased since they started repayment canceled.

This group of borrowers includes singles earning $120,000 or less and married borrowers earning $240,000 or less. No application will be necessary for borrowers to receive this relief if the plan is implemented as proposed.

The White House estimates that accrued interest balances to date will be forgiven for 25 million borrowers, and it is likely that the entire growth of their balance will be forgiven for 23 million.

The sad reality is that millions of students who had to resort to student loans continue to see their balances grow due to accumulated interest, despite fulfilling their obligation to make monthly payments.

Worse yet, many have had this unpaid interest capitalized, which has been added to their principal balance. In other words, they are paying interest on a higher amount than they originally borrowed.

The student debt relief plan is being carefully designed to avoid being challenged in court, as has happened in the past. Therefore, it focuses on specific groups, especially low-income individuals.

It is important to understand that the issue of student debt is much more than a personal problem, as it affects equity, social justice, and even the economy.

A high level of debt prevents graduates from reaching goals such as buying a home, starting a family, or saving for retirement. This reduces economic stability and social mobility. Needless to say, this negative impact is disproportionately felt by low-income individuals, such as the Latino or Black minorities.

It is obvious that student debt exacerbates inequality and helps perpetuate the cycle of poverty. Opposing a debt relief plan of this nature can only come from those who seek to keep certain groups oppressed. Guess who one of its main opponents is? Correct. Donald Trump.