Answering graduate loan forgiveness questions

We answer three questions about how grad debt is being impacted by the Biden administration’s debt relief plan.

On August 24th, the This was announced by the Biden administration it planned to forgive some federal debt for student loans. The Department of Education will award up to $10,000 to many students and up to $20,000 for students who received Pell Scholarships during their school years if they meet income requirements.

Since then, several readers have contacted VERIFY with questions about how graduate loans affect that decision. We answer the most common student loan forgiveness questions.

THE SOURCES

QUESTION 1

Are Student Loans Included in the Student Debt Relief Plan?

THE ANSWER

This is true.

Yes, graduate loans are included in the student debt relief plan.

WHAT WE FOUND

Debt incurred on graduate loans can be forgiven as long as it is a federal loan held by the Department of Education.

Minister of Education Miguel Cardona tweeted that all loans held by the Department of Education are forgivable. These include Graduate Loans – as well as Grad PLUS Loans, Parent PLUS Loans, and Spouse Loans.

“We were concerned that they would exclude Grad or Parent PLUS or both,” said Betsy Mayotte, president of the Institute of Student Loan Advisors (TISLA). “And they are absolutely not excluded. You are entitled to that forgiveness as well.”

Other student loan experts echoed Mayotte’s assurances.

“We have confirmed that graduate borrowers will be included in this cancellation,” said Jessica Thompson, vice president of the Institute for College Access & Success (TICAS). “So again: same income limits, same amounts.”

More from VERIFY: Yes, eligible government employees can still receive full federal student loan forgiveness

QUESTION 2

Can student loans receive a $20,000 grad loan forgiveness if they received Pell Grants as undergraduate students?

THE ANSWER

This is true.

Yes, student borrowers are eligible for $20,000 in grad loan forgiveness if they received Pell Grants as undergraduate students.

WHAT WE FOUND

Students qualify for up to $20,000 in federal debt relief on all state student loans when they receive a Pell grant.

Pell Grants are typically only awarded to “undergraduate students who have exceptional financial need and have not earned an undergraduate, graduate, or professional degree,” according to the US Department of Education.

However, some students may have received a Pell Scholarship as undergraduates and subsequently racked up federal loan debt from grad school. The White House forgiveness plan states that such a person would be eligible for $20,000 in debt forgiveness even if the outstanding loans were only graduate loans.

Not once does the White House or the Department of Education state that the additional forgiveness for Pell Grant recipients applies solely to student loans. A Graphic tweeted by Biden When he first announced the plan, it said the plan would forgive his administration $20,000 in debt “if you go to college on Pell Grants.”

“Think of the Pell Grant receipt as an eligibility criteria that will determine the amount you can nullify against all of your outstanding qualifying (e.g., state) debt,” said Jessica Thompson, vice president of TICAS.

Individuals enrolled in post-high school teacher certification programs are also eligible for Pell Grants, and if they received a Pell Grant during those programs, they are also eligible for a $20,000 forgiveness.

More from VERIFY: Yes, Parent PLUS loans qualify for debt relief

QUESTION 3

Do the changes to income-related repayment schedules also apply to graduation loans?

THE ANSWER

That's wrong.

No, the changes to the income-based amortization schedule do not apply to graduation loans.

WHAT WE FOUND

The changes to the earnings-related repayment schedules specifically target student loans, not student loans. Even so, people with both types of loans have a new interest rate and don’t have to make two separate payments.

The White House says payments to income-based repayment plans will be capped at 5% of a borrower’s discretionary income, half the current 10% cap. Additionally, the Department of Education covers a borrower’s monthly unpaid interest, so the borrower’s balance does not grow as long as they make their monthly payments to their income-based repayment plan.

But the Department of Education says its new rule would “require borrowers to pay no more than 5% of their discretionary income on student loans each month.”

Another press release from the Department of Education also explains that the rate cut applies to student loans, but goes a step further and clarifies “Student and college loan borrowers pay a weighted average rate.”

So that means that people with both types of loans with income-based repayment plans would pay at a rate between 5% and 10% based on how much they owe in student loans versus college loans.

More from VERIFY: Yes, there is a way to check if you have received a Pell Grant

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Alley Einstein

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