President Biden’s Three-Part Plan Delivers on His Promise of Student Debt Relief
President Biden has long emphasized that education after high school should open the door to middle-class opportunity — not lead to decades of financial strain. Yet, for many Americans, the cost of borrowing for college has become a lifelong burden that limits that very chance.
Fulfilling a key campaign promise, the Biden Administration is introducing a three-part plan to provide meaningful student debt relief, giving working and middle-class families some breathing room as they resume loan payments after the pandemic’s economic challenges.
Since 1980, the total cost of attending both public and private four-year colleges has nearly tripled, even when adjusted for inflation. Meanwhile, federal assistance hasn’t kept pace: Pell Grants, which once covered about 80% of the cost of a four-year public degree for working families, now cover only about one-third. As a result, countless students from low- and middle-income backgrounds have been forced to borrow in order to earn a degree.
According to the U.S. Department of Education, the average undergraduate borrower now leaves college with nearly $25,000 in student debt—a figure that underscores the urgent need for relief.
The total federal student loan debt in the United States has surged to $1.6 trillion, affecting more than 45 million borrowers, and continues to grow. This mounting debt has become a major strain on America’s middle class. Many borrowers face steep monthly payments and increasing balances that make it harder to achieve financial stability—whether it’s buying a home, saving for retirement, or starting a small business.
For the most vulnerable borrowers, the impact is even more severe. According to a U.S. Department of Education analysis, nearly one-third of borrowers carry student debt but never earned a degree, often because tuition costs became unaffordable. About 16% of borrowers are in default, including almost a third of older Americans with student loans. Default can lead to wage garnishment and lower credit scores, deepening financial hardship.
The burden also falls disproportionately on Black borrowers. Two decades after first enrolling in college, the average Black borrower who started school in the 1995–96 academic year still owed 95% of their original loan balance, underscoring persistent inequities in the student debt crisis.
Today, President Biden unveiled a three-part plan designed to give working families more financial relief as they continue recovering from the economic challenges of the COVID-19 pandemic. The plan delivers targeted student debt forgiveness and broader reforms to make college costs and loan repayment more manageable for middle- and low-income Americans.
Additionally, to ensure a smooth return to repayment and help borrowers avoid default, the pause on federal student loan payments will be extended one final time through December 31, 2022. Loan repayments will resume in January 2023.
Making the Student Loan System More Manageable for Current and Future Borrowers
1. Cutting monthly payments for undergraduate loans in half.
The Department of Education is proposing a new income-driven repayment plan designed to ease the burden on low- and middle-income borrowers. The plan would cap monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half the rate required under most existing repayment programs. It would also protect more low-income borrowers from having to make any payments at all. As a result, the average borrower will save more than $1,000 each year on student loan payments.
2. Fixing the Public Service Loan Forgiveness (PSLF) program.
To ensure that borrowers who dedicate their careers to public service receive the forgiveness they’ve earned, the Department of Education is proposing new rules to repair and improve the PSLF program. These changes will guarantee that individuals who work for nonprofits, the military, or federal, state, tribal, or local governments receive proper credit toward loan forgiveness. The reforms build on temporary improvements already made, through which more than 175,000 public service workers have received over $10 billion in approved loan forgiveness.
3. Protecting future students and taxpayers by reducing college costs and increasing accountability.
The President has led efforts to lower the cost of higher education and ensure students get value for their investment. His administration secured the largest increase to Pell Grants in more than a decade and one of the biggest single infusions of funding for colleges and universities. President Biden continues to push to double the maximum Pell Grant and make community college tuition-free.
At the same time, colleges and universities must do their part—keeping tuition reasonable and ensuring that degrees lead to real opportunities, not unmanageable debt. The Administration has already strengthened oversight and accountability, reversing rollbacks made under the previous administration. The Department of Education is now launching new initiatives to ensure students receive genuine value for their education costs.
Providing Targeted Debt Relief, Fulfilling the President’s Campaign Promise
To help low- and middle-income borrowers recover from the financial impact of the pandemic and prevent defaults as loan repayments resume, the Department of Education will offer targeted student loan forgiveness.
Borrowers with federal student loans held by the Department of Education who earn less than $125,000 per year (or $250,000 for married couples) will be eligible for relief.
- Those who received a Pell Grant will qualify for up to $20,000 in loan forgiveness.
- Borrowers who meet the same income criteria but did not receive a Pell Grant can receive up to $10,000 in relief.
Because nearly all Pell Grant recipients come from families earning under $60,000 annually, this relief is especially focused on helping borrowers who face the greatest challenges in repaying their student loans.
The Pell Grant program has long been one of America’s most effective tools for expanding access to higher education, but its purchasing power has declined over time. Today, Pell Grant recipients make up more than 60% of all student loan borrowers. The Department of Education estimates that approximately 27 million borrowers will qualify for up to $20,000 in debt relief, helping them reach their full economic potential and recover from the financial challenges caused by the COVID-19 pandemic.
Current students with outstanding loans are also eligible for this relief. For dependent students, eligibility will be determined based on their parents’ income, rather than their own.
If all eligible borrowers claim the debt relief available to them, these actions will achieve the following outcomes:
- Provide relief for up to 43 million borrowers, including full loan cancellation for roughly 20 million people.
- Focus support on low- and middle-income borrowers. According to the Department of Education, nearly 90% of the relief funds will go to borrowers earning less than $75,000 per year. No individual earning more than $125,000, or household earning more than $250,000—the top 5% of U.S. incomes—will benefit from this program.
- Assist borrowers across all age groups. Among those eligible, 21% are age 25 or younger, 44% are between 26 and 39, and over one-third are 40 or older, including 5% who are senior citizens.
- Promote racial equity. By directing relief to borrowers with the greatest financial need, this plan will help reduce the racial wealth gap. Black students are more likely to borrow for college and to take on larger loans than their white peers—and are twice as likely to have received Pell Grants. Other students of color are also more likely to receive Pell Grants. Research from the Urban Institute shows that debt forgiveness programs targeting Pell Grant recipients are especially effective in advancing racial equity.
The Department of Education will move quickly to create a simple and efficient application process for borrowers to access their student debt relief. The application will be available no later than the end of the year, when the pause on federal student loan repayments expires. Additionally, about 8 million borrowers may receive relief automatically, as the Department already has their relevant income information on file.
Under the American Rescue Plan, this student debt relief will not be considered taxable income for federal tax purposes.
To ensure a smooth transition back to repayment, the Department of Education is extending the pause on federal student loan payments one final time—through December 31, 2022. Since President Biden took office, no borrower with federally held loans has been required to make a single payment.
Making the Student Loan System More Manageable for Current and Future Borrowers
Fixing Existing Loan Repayment to Lower Monthly Payments
The Administration is overhauling student loan repayment options to ensure that both current and future low- and middle-income borrowers face smaller, more manageable monthly payments.
The Department of Education has the authority to design income-driven repayment (IDR) plans, which set monthly payments as a percentage of a borrower’s discretionary income and forgive any remaining balance after 20 years of qualifying payments. However, existing plans are overly complicated and too restrictive, preventing millions of borrowers from taking advantage of them. Even those enrolled often struggle with payments that remain too high.
Through these reforms, the Administration aims to simplify repayment, expand access, and make the system work as intended—helping borrowers stay current, reduce financial stress, and ultimately achieve debt forgiveness.
To address these challenges and fulfill Congress’s original intent for income-driven repayment, the Department of Education is proposing a new rule that would:
- Cut monthly payments in half for undergraduate loans, reducing the payment rate from 10% to 5% of a borrower’s discretionary income.
- Increase the threshold for protected income, ensuring that borrowers earning less than 225% of the federal poverty level—approximately the annual equivalent of a $15 hourly wage for a single worker—will not be required to make any monthly payments.
- Provide faster forgiveness for smaller loan balances, cancelling remaining debt after 10 years of payments instead of 20 for borrowers whose original loan balance was $12,000 or less. The Department estimates that this change would allow nearly all community college borrowers to become debt-free within a decade.
- Eliminate the accrual of unpaid interest, guaranteeing that no borrower’s balance will increase as long as they make their required payments—even if their monthly payment is $0 due to low income.
These reforms are designed to make repayment fairer, simpler, and more sustainable for millions of borrowers.
These reforms will simplify the repayment process and provide substantial savings for low- and middle-income borrowers. For example:
- A single construction worker earning $38,000 per year with a construction management credential would see their monthly payment drop from $147 to just $31, saving nearly $1,400 a year.
- A public school teacher with a bachelor’s degree earning $44,000 annually would pay $56 a month, down from $197, resulting in about $1,700 in yearly savings.
- A nurse earning $77,000 per year, married with two children, would pay only $61 a month on undergraduate loans—compared to $295 under the current plan—saving more than $2,800 each year.
Overall, these changes will make student loan payments simpler, fairer, and more affordable for millions of working Americans.
For all of these borrowers, loan balances will no longer increase as long as they make their required monthly payments, and any remaining debt will be forgiven once they complete the necessary number of qualifying payments.
In addition, the Department of Education will simplify the process for staying enrolled in the new repayment plan. Beginning in the summer of 2023, borrowers will have the option to authorize the Department to automatically access their income information each year, eliminating the need for borrowers to manually recertify their income annually.
Ensuring Public Servants Receive Credit Toward Loan Forgiveness
Borrowers who work in public service are eligible to earn credit toward loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. However, due to complex rules, administrative errors, and inadequate guidance, many public servants have not received the credit they rightfully earned.
To fix this, the Department of Education has introduced temporary changes to the PSLF program, making it easier for eligible federal student loan borrowers to qualify for full debt forgiveness. These updates apply to individuals who have worked for at least 10 years—including non-consecutive years—in nonprofits, the military, or federal, state, Tribal, or local government positions.
Borrowers who have served for fewer than 10 years can now more easily receive credit for their service toward eventual forgiveness. Importantly, these changes also allow eligible borrowers to gain credit even if they previously had the wrong loan type or were told they did not qualify under the old rules.
The Department of Education has also proposed new regulatory updates to improve the long-term effectiveness of the Public Service Loan Forgiveness (PSLF) program. These proposed changes would:
- Expand the types of payments that qualify for PSLF, including partial payments, lump-sum payments, and late payments.
- Allow certain types of deferments and forbearances—such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service—to count toward loan forgiveness.
- Simplify eligibility for non-tenured instructors by ensuring colleges can more accurately calculate their full-time employment status.
To raise awareness of these temporary improvements, the White House launched four PSLF Days of Action, focused on key groups of public servants: government employees, educators, healthcare workers and first responders, and nonprofit staff.
Borrowers can learn more about these changes at PSLF.gov, but must apply before October 31, 2022, when the temporary relief measures expire.
Protecting Borrowers and Taxpayers from Rising College Costs
While offering relief to low- and middle-income borrowers, President Biden is also focused on addressing the root of the problem—rising college costs. Under his Administration, students have gained greater financial support to help pay for their education. The President signed into law the largest increase to the maximum Pell Grant in more than a decade and directed nearly $40 billion to colleges and universities through the American Rescue Plan. Much of this funding was used for emergency student financial aid, giving students much-needed breathing room during challenging times.
In addition, the Department of Education has strengthened oversight and accountability to protect students from taking on excessive debt for degrees that fail to deliver value. The Department reinstated the enforcement unit within the Office of Federal Student Aid and began holding accrediting agencies accountable for their oversight. Recently, it even revoked approval for an accreditor that had overseen institutions involved in major for-profit college scandals.
The Department is also preparing to introduce a new rule to hold career education programs responsible when they leave graduates burdened with debt they cannot repay—a safeguard that had been eliminated under the previous administration.
Building on these efforts, the Department of Education is introducing new measures to hold colleges accountable for contributing to the student debt crisis. These actions include:
- Publishing an annual watch list highlighting the academic programs with the highest debt levels nationwide, giving students clear information to help them avoid programs with poor financial outcomes.
- Requiring improvement plans from institutions with the most troubling debt statistics, detailing how they intend to reduce student debt burdens and improve post-graduation results.
Through these steps, the Department aims to promote transparency, protect students, and encourage colleges to take greater responsibility for the financial well-being of their graduates.