More than 408,000 Iowans will see student loan debt decrease, officials say
More than 408,000 Iowans will be eligible for student loan debt forgiveness under President Joe Biden’s plan, according to White House data.
The Biden administration’s loan forgiveness program, announced in August, is set to eliminate $10,000 in college debt for people who earn $125,000 annually or less. For Pell Grant recipients, up to $20,000 will be forgiven.
In Iowa, 408,700 borrowers will qualify for the student debt relief program. Over half of that group, 248,900, are Pell Grant recipients. That makes up roughly 95% of people in the state with student loan debt, according to Federal Student Aid data, as about 429,000 Iowans owed money for student loan debt as of March 31.
U.S. Sen. Elizabeth Warren, D-Massachusetts, said the program will help Americans escape the “debt prison” that some families are trapped in. She said the assistance is needed to make up for the lack of government funding and assistance at colleges in recent years.
“Today, college costs thousands or even tens of thousands of dollars,” Warren said Tuesday on a White House call about the program. “And instead of investing taxpayer dollars to bring down those costs, state governments have reduced their financial support and the federal government has told everyone to borrow the money they need to cover the rising costs of going to school.”
President Joe Biden's administration estimates that nearly half of the 40 million expected debt relief recipients will see their total remaining balance wiped out from the program. However, Iowa borrowers still hold an average cost above the aid maximums at an average of $30,988 per person, federal data found. Iowa holds the second-least amount of debt per person in the country.
Only 13% of the state's population has student loan debt. In total, the Iowa borrowers owe $13.3 billion. However, more than half of people with student debt have a remaining balance of less than $20,000, and will see their remaining debt eliminated.
Debt forgiveness will not be automatic for everyone under this program. People whose information the Department of Education already has will see their debt totals reduced immediately, but others will have to apply for the aid. White House officials say they hope to open applications for the program in early October, but no further information has been publicized.
Some Republicans, including Iowa Gov. Kim Reynolds, have called for Biden to withdraw the program before that application start date. She, alongside 22 other governors, wrote a letter to the administration criticizing the plan, saying that it will force taxpayers to shoulder the costs that student borrowers voluntarily took on to attend college.
People who chose to pursue higher education typically earn more, Reynolds argued, and it is unfair to place that debt on people who earn less.
"Simply put, your plan rewards the rich and punishes the poor,” Reynolds said in a statement.
Biden administration officials disagreed, arguing that the program will overwhelmingly help low-income borrowers and people of color. A Census Bureau study released Wednesday found the loan reduction plan would help Hispanic and Black borrowers reduce their college debt more than white men on average, and would help more people with associates' and bachelors' degrees than those with advanced degrees.
U.S. Undersecretary of Education James Kvaal said the debt reduction will help ease the rising price of college, but the administration is taking more steps to keep costs down. The Department of Education will lower the monthly repayment limit from 10% to 5% of a borrower’s discretionary income, and would forgive loan balances after 10 years of payment, instead of 20 years, for people with $12,000 or less remaining loan debt.
"When payments resume, we want borrowers to succeed," Kvaal said. "The system we had before the pandemic was not working,”